Borneo Oil bags mining contract in Pahang

PETALING JAYA: Borneo Oil Bhd's wholly-owned subsidiary Borneo Oil and Gas Corp Sdn Bhd (BOG) entered into an exclusive production sharing agreement with HDL Global Sdn Bhd yesterday to carry out mining works on an exclusive basis in Pahang.

The agreement includes prospecting, exploration, mining, extraction, processing, marketing, sales and collection of sales revenue with respect to all minerals and precious metals including gold.

In a filing with Bursa Malaysia yesterday, Borneo Oil said the mining works will be carried out on an exclusive basis on an area measuring 1,200ha in Hutan Simpan Bukit Ibam, a forest reserve located in Rompin, Pahang.

It estimates an initial financial commitment of RM5 million for preliminary exploration works, a budget of RM20 million for plant and equipment and initial working capital of RM12 million for alluvial gold mining.

The mining area was contracted to HDL by Pahang State Development Corp (PKNP) on May 21, 2010.

HDL, which was established on Dec 8, 2001, is owned by Datuk Seri Wong Chong Meng and Muhammad Daniel 'Aizat M. Samuel. PKNP had obtained a prospecting licence from the state government of Pahang to carry out large scale exploration of minerals on the mining area.

A mining lease covering an area of 187ha in the same forest reserve was issued to PKNP on Dec 9, 2009. In addition, HDL has five additional mining leases under application.

According to a search with Companies Commission Malaysia (SSM) HDL Global made a net loss of RM292,555 on revenue of RM491,383 for the financial year ended Dec 31, 2013.

Under the agreement, BOG was granted sole and exclusive rights to prospect and explore the mining area for minerals and precious metals including gold.

It will carry out mining works on the mining area within six months from the date of the agreement, if exploration indicates the existence of such resources including gold.

BOG will also advance a total sum of RM5 million to HDL. Net profit generated from the mining project will be shared on a 60:40 basis with BOG taking 60%.

In addition, BOG will pay tributes of 2.5% to PKNP and 5% to the Land and Mines Office based on sales revenue.

The duration of the agreement is for 20 years or the date all minerals and precious metals on the mining area have been exhausted, whichever is later.

Borneo Oil said the agreement will not have any effect on its issued and paid-up capital and is expected to contribute positively to the earnings of the group in the future.