Pan Asia Corporation (ASX: PZC) has been repaid a US$4.5 million (A$4.3 million) loan by Ranrich Investments following a restructured agreement.
Under the agreement struck with Ranrich last month, Pan Asia also agreed to exchange its right to earn a 50% interest in the BCKP project for a royalty of US$1 per tonne on all coal sold from the project, up to US$15 million.
Importantly, the loan repayment strengthens Pan Asia's near term cash position while the royalty provides continuing cash flow.
Ranrich Investments, a company controlled by Pan Asia director Honardy Boentario and Pan Asia wholly owned company Innovation West, initially entered into a Memorandum of Agreement in 2010 for the financing of and investment in various coal projects.
The repayment of the finance was based on Ranrich making contracted coal shipments to a designated buyer arranged by Innovation West.
Since entering into the original financing arrangement, Ranrich struggled to provide the scheduled coal deliveries and was required to repay the principal monies outstanding under the contract to Pan Asia.
Also as part of the restructured agreement Boentario will step down as a director of Pan Asia.
Pan Asia chief executive officer Alan Hopkins said, "This settlement is very timely as we can now focus on choosing the best development arrangements for our Flagship TCM project."
Towards the end of 2011 Pan Asia received a major 115% JORC Resource boost to 114.6 million tonnes at the Transcoal Minergy Coal Project in Indonesia - which importantly has 62% of the resource in the higher confidence categories of Measured and Indicated.
The size of the upgrade was better than expected at the time, and supported the company's belief that the project has potential to be an initial open pit mine and bring project cash flows forward while generating a preferred entry for future underground mining.