The deal values the combined entity at $73 million and combines East Energy's 1.74 billion tonne Resource with Indalia's 440 million tonne Inferred Resource and drill identified exploration target of between 4 billion and 4.5 billion tonnes.
Importantly, East Energy's board believes the highly prospective new assets will generate value as they are located along strike of the company's current deposits.
Under the deal, East Energy will add EPC 1398, located immediately adjacent to the south of its EPC 1149; EPC 1399, which is north of EPC 1149; and EPC 1400.
The JORC Resources and exploration targets are based on exploration - including 148 boreholes totalling 27,600 metres - of EPCs 1398 and 1399.
Idalia has also moved to surrender EPC's 1402, 1404, 1406, 1408 and 1409 and has lodged to renew and partially surrender EPC's 1403 and 1407.
Together with East Energy's assets, these tenements will provide the foundation for the development of rail and port infrastructure, able to support a large scale mining operation in western Queensland.
East Energy will acquire 100% in Idalia by offering the equivalent of $40 million in new shares priced at $0.20 each to Noble and Majicyl.
East Energy is acquiring Idalia, from Camvill Pty Ltd (a wholly owned subsidiary of the Noble Group and Majicyl Pty Ltd, a company associated with the Basso-Brusa family.
Noble currently holds 50.1% of Idalia and Majicyl holds 49.9% of Idalia. Following completion of the Transaction, Noble and Majicyl will hold 41.18% and 45.98% of the issued shares of East Energy, respectively.
Other shareholders will hold 12.84% of the merged entity.
Noble will also provide East Energy with a debt re-financing arrangement to repay the debt that East Energy owes to Idalia under the facility agreement between the two companies dated 24 September 2012.
The final amount to be refinanced will be determined on the business day immediately preceding the close of the transaction but is currently forecast to be between $10 million and $11 million.
Post the repayment of the EER Facility and the Idalia Loan, EER will have a further $7.5 million available for draw down and working capital purposes under the Debt Re-Financing arrangement.
- Complete confirmatory due diligence by mid to late February 2013;
- Negotiate and execute formal agreements by mid to late February 2013;
- Despatch notice of meeting and Independent Expert's Report by end February 2013;
- EER General Meeting of Shareholders by mid to late March 2013;
- Transaction Completion Date by mid to late March 2013
East Energy's Blackall coal project is the most advanced project in the Eromanga region.
The current geological model indicates seam continuity to the north of the current Resource, which in turn is sufficient to support a large open-cut thermal coal mine with long mine life.
East Energy has drilled more than 350 holes on Blackall since 2008.
Prior to the acquisition, East Energy was already well positioned to leverage the infrastructure options being considered for the Galilee Basin and the projected expansion of Queensland's coal ports.
With the addition of Idalia's resources, East Energy is better positioned to progress development of the Blackall project while the debt financing offered by Noble, which replaces the previous funding through Idalia, further reinforces the regard that Noble holds for the company.
It provides a foundation for the development of rail and port infrastructure, able to support a large scale mining operation in western Queensland.
This is a value transformative heads of agreement for East Energy, which provides the scale to trigger infrastructure options. Proactive Investors assess this to be between 40-50 per cent value accretive to East Energy in the short to medium term.
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