Borneo Oil acquires quarry land for RM100.58m

PETALING JAYA: Borneo Oil Bhd is acquiring seven parcels of quarry land measuring a total of 38.06ha in Lahad Datu, Sabah for RM100.58 million cash.

In a filing with Bursa Malaysia yesterday, it said that its wholly-owned subsidiary Borneo Oil & Gas Corp Sdn Bhd has entered into sub-lease agreements with the vendors and marble quarry operator agreements to operate the quarry lands.

The agreements, which would enable it to extract marble blocks for export and limestones (as a by-product) for limestone based products, is in line with its expansion plan into limestone mining and related activities.

"Legal limestone reserves are a scarce resource in Sabah, as most of the limestone reserves are situated in Class 1 Forest Reserve, Bird Nests' Sanctuaries and Heritage Parks.

"With the acquisitions, the company together with its existing land bank of limestone reserves held for long term investment shall become a substantial player in the supply of high grade limestone resources," it said.

The company said Sabah is the only state in Malaysia without clinker production and imports over 1.5 million tons of clinker and cement yearly. The setting up of a clinker plant in Sabah is imminent and the main source of feedstock for the production of clinker is limestone.

"Over the years, Borneo marble brand has established a name and is well known in China. The acquisition price represents a substantial discount compared to the value of the resources available with valid quarry operating conditions endorsed on all the titles," it added.The seven parcels of quarry land have reserves/resources of 24.54 million MT and the sub-lease agreements are for 30 years with an automatic renewal of another 30 years.

Under the marble quarry operator agreements, Borneo Oil & Gas Corp will be the sole and exclusive operator to the quarry land for 30 years.

The annual production allowable for the seven parcels is 66,934 cubic metres, giving an estimated net income of RM10.04 million per year while the marble portion of the assets is expected to produce a yield of 1.7-9.1% per year.

The operator guarantees first two years minimum 1,000 cubic metre or guaranteed monthly compensation of RM150,000 and from the third year onwards, a minimum 2,000 cubic metre or guaranteed monthly compensation of RM300,000.

The company expects the acquisition to be completed within two months and contribute to its overall earnings in the future.