Nusantara Resources secures $60 million investment in Indonesian gold project

Indonesia-focused Nusantara Resources (ASX: NUS) has inked a binding deal with energy company Indika Group to secure at least US$40 million (A$60.65 million) to develop its 2 million-ounce Awak Mas gold project in South Sulawesi.

The agreement follows a non-binding term sheet signed by the parties in early December, in which Indika declared its intention to invest the funds into Nusantara’s wholly-owned subsidiary and Awak Mas project operator, PT Masmindo DWI Area, in two stages to earn a 40% stake.

The term sheet also called for Indika’s 70% owned subsidiary PT Petrosea to be awarded the frontend engineering and design contract for the project and to negotiate an engineering, procurement and construction contract, in exchange for an additional US$40 million (A$60.65 million) in deferred payment arrangements.

In today’s announcement, Nusantara said the project equity arrangements contemplated with Indika under the term sheet have now been documented into binding agreements.

Under the deal, Indika will invest an initial US$15 million (A$22.73 million) to earn a 25% interest in the project, then pay an additional US$25 million (A$37.88 million) to earn a further 15% stake.

The agreement remains subject to shareholder approval and is conditional on the achievement of certain milestones.

FEED and EPC contracts

Nusantara said it is currently in advanced negotiations with Petrosea on the FEED contract, which is to be completed by the latter during 2020 using up to US$10 million deferred payment arrangements.

The EPC contract, including up to US$30 million deferred payment arrangements provided by Petrosea, is expected to be negotiated during the term of the FEED contract.

The award of the FEED contract is a condition of Indika’s stage one investment and is expected to be awarded during the current first quarter of 2020.

Awak Mas gold project

Nusantara’s Awak Mas project is located on the east coast of Indonesia’s South Sulawesi province and contains an ore reserve of 1.1Moz gold within a 2Moz gold mineral resource.

A definitive feasibility study completed in late 2018 confirmed it as a robust, long-life and low-cost gold project, supporting an initial 11-year mine life with an annual production capacity of around 100,000oz gold.

In addition to Indika’s investment, Nusantara said project debt will be sought for the balance of funding the US$146 million capital expenditure required for Awak Mas’ development, plus the US$16 million in pre-production mining costs estimated in the definitive feasibility study.

The company has appointed Noah’s Rule as the debt advisor to progress this financing, describing it as an important step “to facilitate a decision to mine in late 2020”.

Directors snap up shares

Nusantara began early capital expenditure on the Awak Mas project after raising A$11.6 million through a placement and share purchase plan announced in December.

Three Nusantara directors chipped in $30,000 each in the share purchase plan in January, including executive chairman Greg Foulis, non-executive director Robin Widdup and chief financial officer Craig Smyth.

Non-executive director Kamen Palatov also bought $44,000 worth of shares on market earlier this month.