SUMATRA COPPER & GOLD plc ABN 14 136 694 267
SUMATRA COPPER & GOLD plc
PROSPECTUS For personal use only use personal For
For an offer of 60,000,000 CDIs for Shares at an Corporate Adviser issue price of $0.20 each to raise $12,000,000. and Lead Manager
IMPORTANT INFORMATION
This is an important document that should be read in its entirety. If you do not understand it you should consult your professional advisers without www.sumatra‑copper‑gold.com delay. The CDIs for Shares offered by this Prospectus should be considered highly speculative. For personal use only Glossary Section 13 Directors’ Authorisation Section 12 Additional Information Section 11 Risk Factors Section 10 Financial Information Section 9 Abridged LegalReport Section 8 Independent Technical Report Section 7 Board andManagement Section 6 Company andProject Overview Section 5 Details oftheOffer Section 4 Investment Summary Section 3 Chairman’s Letter Section 2 Corporate Directory Section 1 Important Notice Contents 79 78 65 60 57 44 31 29 12 10 5 4 3 1
4003 Designed and Produced by RDA Creative www.rda.com.au Important Notice
This Prospectus is dated 25 August 2009 and was Persons who have received a copy of the Prospectus in lodged with the ASIC on that date. The ASIC and its an electronic form may, during the period of the Offer, officers take no responsibility for the contents of this obtain a hard copy of this Prospectus free of charge by Prospectus or the merits of the investment to which contacting the Company. this Prospectus relates. Exposure Period The expiry date of this Prospectus is at 5.00pm WST on that date which is 13 months after the date this This Prospectus will be circulated during the Exposure Prospectus was lodged with the ASIC (Expiry Date). Period. The purpose of the Exposure Period is to enable No CDIs for Shares may be issued on the basis of this this Prospectus to be examined by market participants Prospectus after the Expiry Date. prior to the raising of funds. Potential investors should be aware that this examination may result in the Application will be made to ASX within 7 days after identification of deficiencies in this Prospectus and, the date of this Prospectus for Official Quotation of the in those circumstances; any application that has been CDIs for Shares the subject of this Prospectus. received may need to be dealt with in accordance with The distribution of this Prospectus in jurisdictions Section 724 of the Corporations Act. outside Australia may be restricted by law and persons Applications for CDIs for Shares under this Prospectus who come into possession of this Prospectus should will not be processed by the Company until after the seek advice on and observe any of these restrictions. expiry of the Exposure Period. No preference will be Failure to comply with these restrictions may violate conferred on persons who lodge applications prior to securities’ laws. Applicants who are residents in the expiry of the Exposure Period. countries other than Australia should consult their professional advisers as to whether any governmental or other consents are required or whether any other Documents Incorporated by Reference formalities need to be considered and followed. The information set out in Section 7 of this Prospectus (which contains a summary of the This Prospectus does not constitute an invitation or Independent Technical Report) is dealt with in more offer in any place in which, or to any person to whom, detail in a separate Independent Technical Report. it would not be lawful to make such an offer. The Independent Technical Report was lodged with It is important that investors read this Prospectus in ASIC on 25 August 2009 and is incorporated by its entirety before deciding to invest in the Company. reference into this Prospectus. In particular, investors should consider the assumptions The information set out in Section 8 of this Prospectus underlying any prospective financial information (which contains a summary of the Legal Report) and the risk factors that could affect the financial is dealt with in more detail in a separate Legal performance of the Company. Investors should seek Report. The Legal Report was lodged with ASIC on professional advice from their accountant, stockbroker, 25 August 2009 and is incorporated by reference into lawyer or other professional adviser where necessary this Prospectus. before deciding to invest in the Company. The CDIs for Shares the subject of this Prospectus should be The Company believes that the information in the considered highly speculative. Independent Technical Report and Legal Report is primarily of interest to professional advisors, Web Site ‑ Electronic Prospectus institutional investors and to investors with similar specialist information needs. However, if you consider A copy of this Prospectus can be downloaded that the information in the Independent Technical from the website of the Company at Report and Legal Report might assist you in making www.sumatra‑copper‑gold.com/prospectus.html. your investment decision, you should obtain a copy Any person accessing the electronic version of this
For personal use only use personal For of the Independent Technical Report and Legal Prospectus for the purpose of making an investment in Report and consult your broker or financial advisor. the Company must be an Australian resident and must The Independent Technical Report and Legal Report only access this Prospectus from within Australia. can be obtained free of charge by contacting the The Corporations Act prohibits any person passing Company on +61 2 9300 3377, or by email at onto another person an Application Form unless it info@sumatra‑copper‑gold.com. is attached to a hard copy of this Prospectus or it accompanies the complete and unaltered version of this Prospectus.
SUMATRA COPPER & GOLD plc PROSPECTUS 1 Important Notice Cont.
Mineralisation Estimates
The Independent Technical Report summarised in Section 7 has been prepared in accordance with the Code and Guidelines for Assessment and Valuation of Mineral Assets and Mineral Securities for Independent Expert Reports (VALMIN Code) which is binding upon members of the Australasian Institute of Mining and Metallurgy (AusIMM), the Australian Institute of Geoscientists (AIG) and the rules and guidelines relating to the independent experts reports set by the ASIC and ASX.
Privacy
If you complete an Application Form, you will be providing personal information to the Company. The Company collects, holds and will use that information to process your application, service your needs as a Shareholder and to facilitate distribution payments and corporate communications to you as a Shareholder.
The Company may disclose your personal information, for purposes related to your investment, to its agents or service providers, including the Broker to the Offer; the Share Registry; print service providers and mail houses. The Company may also disclose your personal information to persons inspecting the register, including bidders for your securities in the context of takeovers; and regulatory bodies, including the Australian Taxation Office.
You can access, correct and update the personal information that we hold about you. If you wish to do so, please contact the Share Registry at the relevant contact number set out in this Prospectus.
Collection, maintenance and disclosure of certain personal information is governed by legislation including the Privacy Act 1988 (Cth) (as amended), the Corporations Act and certain rules such as the ASTC Settlement Rules. You should note that if you do not provide the information required on the application for CDIs for Shares, the Company may not be able to
accept or process your application. For personal use only use personal For
2 SUMATRA COPPER & GOLD plc PROSPECTUS Corporate Directory
Directors Broker to the Issue
Warwick George Morris (Chairman) Argonaut Securities Pty Ltd Jocelyn Severyn de Warrenne Waller (Managing Director) Level 30 Allendale Square Alan Robert Flint (Director of Exploration) 77 St George’s Terrace Lord Daresbury (Non‑Executive Director) Perth WA 6000 Dr Michael Allan Price (Non‑Executive Director) Australia
Company Secretary Independent Technical Experts
Alison Barr CSA Global Pty Ltd Level 1, 47 Burswood Road Registered Office Burswood WA 6100 Australia 20‑22 Bedford Row London WC1R 4JS Share Registry United Kingdom Email: info@sumatra‑copper‑gold.com Computershare Investor Services Pty Limited Website: www.sumatra‑copper‑gold.com Level 19, 307 Queen Street Brisbane QLD 4000 Australian Office Australia Phone: 1300 552 270 (within Australia) Level 2, 66 Hunter Street Phone: +61 3 9415 4000 (outside Australia) SECTION ONE Sydney NSW 2000 Australia Lawyers Phone: +61 2 9300 3377 Fax: +61 2 9221 6333 Minter Ellison (as to Australian law) Aurora Place, 88 Phillip Street Corporate Financial Adviser Sydney NSW 2000 Australia Argonaut Capital Limited
Level 30 Allendale Square Soemadipradja & Taher (as to Indonesian law) 77 St George’s Terrace Wisma GKBI, Level 9 Perth WA 6000 Jl. Jendral Sudirman No.28 Australia Jakarta 10210
Indonesia For personal use only use personal For
SUMATRA COPPER & GOLD plc PROSPECTUS 3 Chairman’s Letter
25 August 2009
Dear Investor
On behalf of the Directors of Sumatra Copper & Gold plc (Sumatra or the Company), I am delighted to offer you the opportunity to become a Shareholder in the Company.
The Company was incorporated in 2006 with the specific objective of compiling a mining exploration rights package on the Indonesian island of Sumatra where historically there has been mining activity, particularly for gold and silver.
The Company holds an economic interest through a Co‑operation Agreement with its Indonesian Partners, in a portfolio of survey and exploration tenements and apparent rights to be granted exploration licences covering an area of approximately 6,000 square kilometres on the island of Sumatra in Indonesia. The directors consider that potential exists for the discovery and future development of economic mineral deposits in this area considering:
• historically, there has been mining activity in the area of the projects, including production of 3.0 million ounces of gold and 25.0 million ounces of silver; and
• the projects have a global mineral resource inventory totalling approximately 2.0 million ounces of gold and 22.3 million ounces of silver (as detailed in Section 7 of this Prospectus); and
• the comments highlighted in the Independent Technical Report that forms part of this Prospectus.
The Company is seeking to issue 60,000,000 CDIs for Shares at an issue price of $0.20 each to raise $12,000,000 to provide funds to continue its survey and exploration program in relation to its mining authorisations and projects over the next 2 years as set out in Section 5.7 of this Prospectus.
This Offer presents investors with an opportunity to become part of a Sumatra‑focused exploration company that is SECTION TWO well positioned to capitalise on the internationalisation of the Indonesian resource sector.
Before making any decision on this investment, I recommend that you read this Prospectus in its entirety and seek professional advice as appropriate. The risks associated with an investment in the Company are summarised and set out in more detail in Sections 3.9 and 10 of this Prospectus respectively.
On behalf of the Directors, I commend this opportunity to you and look forward to welcoming you as a shareholder.
Yours sincerely,
Warwick G. Morris
Chairman For personal use only use personal For
4 SUMATRA COPPER & GOLD plc PROSPECTUS Investment Summary
This Section is not intended to provide full information The gold‑silver projects are located in a district in for investors intending to apply for CDIs for Shares central Sumatra with a substantial known mineral offered pursuant to this Prospectus. This Prospectus endowment and from which more than 3.0 million should be read and considered in its entirety. ounces of gold and 25.0 million ounces of silver are reported to have been produced. In total, as 3.1 Introduction to the Company detailed in Section 5 of this Prospectus, a global JORC compliant mineral resource estimate statement The Company is a minerals exploration company with reporting approximately 2.0 million ounces of gold an initial economic interest of up to 92.5%1 in granted and 22.3 million ounces of silver has been estimated survey and exploration licences and apparent rights within the Project areas (‘JORC compliant’ refers to to be granted exploration licences that extend over the Australasian Code for the reporting of Exploration 6,000 km2 in the central part of Sumatra, Indonesia. Results, Mineral Resources and Ore Reserves (the JORC Code 2004 Edition)). The Company holds its interest in the exploration licences and apparent rights to be granted exploration Summary details of the Projects are described below. licences and conducts its activities pursuant and subject A full description of the Projects is contained in to a Co‑operation Agreement with its Indonesian the Independent Technical Report in Section 7 of Partners. The Partners comprise Mr Adi Sjoekri, this Prospectus and a summary of the Company’s a western‑educated professional geologist who legal interest in each of the Projects is set out in the previously worked with CSR/Billiton and then Newmont Abridged Legal Report by the Indonesian law firm of Mining Corporation in both Indonesia and the USA, Soemadipradja & Taher in Section 8 of this Prospectus. and two companies controlled by him. (a) Tembang 1 The New Mining Law contains a provision which states that 5 years after commercial production, foreign holders of • A previous open pit mine that operated from 1997 to interests in an Indonesian mining licence holding company are required to divest a percentage of their interest. Regulations 2000, its closure mainly attributable to low gold prices. setting out the percentage of required divestment have not yet been passed. However, current indications are that, • Global JORC compliant Mineral Resource estimate commencing on the 5th year after commercial production, statement, reporting approximately 53.7 million foreign interests must be reduced over a 4 year period so that tonnes at 1.0 g/t and 11.5 g/t silver for a total of the foreign interests in the relevant Indonesian mining licence 1.64 million ounces of gold and 19.8 million ounces SECTION THREE holding company can be no greater than 80%. To date, such of silver, including a higher grade zone of vein regulation has not been issued and could specify a different percentage to be divested and/or a different time period for material of 12.0 million tonnes at 1.9 g/t gold and completion of the divestment process. 28.6 g/t silver, have been estimated.
3.2 Management • Up to 6,500 metres of diamond and RC drilling is planned at Tembang to test down‑dip and The Board of Directors comprise members with a along‑strike extensions of higher grade epithermal combination of technical, financial, commercial gold‑silver mineralisation. and international experience in mining. In addition the Company and its Indonesian Partners have (b) Sontang assembled a capable and qualified management • A virgin “manto” style discovery by NPM with the team comprising some expatriates and a core of assistance of the Company which has been subject Indonesian professionals. to minimal exploration to date.
3.3 The Projects • Rock chip sampling results up to 24.5 g/t gold 1,000.0 g/t silver, 12.2% lead and 30.8% zinc. The survey and exploration licence areas and the
For personal use only use personal For areas over which rights to obtain exploration licences • Weighted average from 54.8 metres of sawn rock appear to be held, within which all the Projects are channel samples are 2.87 g/t gold, 118 g/t silver, located, include three historic epithermal gold‑silver 0.57% lead and 5.66% zinc. mines which, prior to mining, each hosted more than 1.0 million ounces of gold. Exploration by the • Exploration licence already granted under New Company over the past 3 years has located gold and Mining Law. silver mineralisation within and adjacent to these former mines.
SUMATRA COPPER & GOLD plc PROSPECTUS 5 Investment Summary Cont.
• Phase 1 work program proposes geophysical 3.4 Exploration Focus and further geochemical surveys together with a minimum of 1,000 metres of diamond drilling The Company aims to focus its exploration on which will start in late 2009. epithermal gold‑silver systems and copper‑gold porphyry‑related mineral systems within the Projects • Phase 2 program consists on a further 3,500 metres based on technical analogies with the Philippines, of drilling subject to the results of Phase 1. where such systems occur within or adjacent to the gold‑silver mining camps. (c) Lebong Exploration for copper‑gold porphyry‑related mineral • The Lebong Project includes two under‑explored systems in Sumatra has historically been limited; mining districts; Donok and Tambang Sawah. however evidence of such mineralised systems has been identified at the Sontang Project. • The Donok underground mine previously operated by the Dutch up to 1939 with recorded production of 1.34 million ounces of gold and 7.4 million 3.5 Sovereign Risk ounces of silver at a grade of 12.8 g/t gold and Indonesia is a developing country subject to an 70.5 g/t silver where previous drilling has recorded emerging legal and political system compared intercepts up to 69.3 metres at 2.7 g/t gold. with the system in place in Australia. However, the • Tambang Sawah underground mine is less Directors consider it encouraging that this year a well understood than Donok, but drilling by New Mining Law has been promulgated. The effect the Company has recorded intercepts of up to of this legislation is to replace all existing forms of 28.8 meters at 4.6 g/t gold. mineral authorisations and contracts of work with a new licensing system. Significantly, for the first time, • No exploration work is planned whilst a dispute in foreign entities will be able to establish an Indonesian respect of overlapping claims remains unresolved. mining company to hold a direct interest in a mineral licence and can also have a direct investment in such (d) Tandai Indonesian companies. Although the implementing regulations to cover the processes for transition • Large intermediate sulfidation epithermal system from the old system to the new have not yet SECTION THREE with molybdenum anomalies to the west. been promulgated, certain existing mineral rights applications have been “grandfathered” under Article • Historical Dutch production totalled 1.4 million 172 of the New Mining Law. Future new mineral ounces of gold and 15 million ounces of silver at a licence grants that have not been “grandfathered” grade of 15.4 g/t gold and 167 g/t silver. Also mined under Article 172 of the New Mining Law will be by the Japanese for copper during WWII. subject to an auction procedure. • The Company and its Indonesian Partners’ survey The Full Legal Report by the Indonesian law firm of results have confirmed that gold mineralisation Soemadipradja & Taher, an abridged version of which is remains in the foot wall and hanging wall as set out in Section 8, gives a summary of the Company’s indicated by the Company’s drill intercepts and its Indonesian Partners’ rights in relation to the including 72.9 metres (22.0 metres true width) various mining authorisations held and/or applied for at 2.0 g/t gold adjacent to old Dutch stopes. by them and also summarises various aspects of the • Multi million ounce target potential exists at the mining regime under the New Mining Law. Tandai project. 3.6 Use of Funds • Initial work program will involve additional historical data acquisition from archives in The Hague and The proposed exploration programs may be subject
For personal use only use personal For Indonesia and conducting further geochemical to change and will be contingent on circumstances, surveys to define future drilling targets. results and other opportunities. The following tables illustrate the proposed application over a two year period of the funds to be raised by the Offer.
6 SUMATRA COPPER & GOLD plc PROSPECTUS Investment Summary Cont.
If the full subscription of $12,000,000 is raised from On 14 August 2009, Macquarie agreed to make a short the Offer, the Company intends to apply funds raised term facility for up to US$250,000 available to the from the Offer as follows: Company. As at the date of this Prospectus, the Company has not drawn down any amounts under this facility. Year 1 Year 2 Total ($000) ($000) ($000) Further information in relation to these facilities is set out in Section 11.7 of this Prospectus. Exploration General 1,984 1,581 3,565 Exploration Drilling 1,248 1,100 2,348 3.8 Working Capital
Administration 501 376 877 On completion of the Offer, the Company will have Retire Macquarie Facilities 3,868 ‑ 3,868 sufficient working capital to carry out the objectives stated in this Prospectus even if only the minimum Expenses of Issue 1,173 ‑ 1,173 subscription amount is raised. The above tables General Working Capital 84 85 169 are the current intentions of the Company as at the date of lodgement this Prospectus. Intervening Total 8,858 3,142 12,000 events (including the success or failure of exploration programs) and changing circumstances have the If the minimum subscription of $10,000,000 is raised potential to alter the way in which the funds will be from the Offer, the Company intends to apply funds applied. The Board reserves the right to change the raised from the Offer as follows: application of funds accordingly.
Year 1 Year 2 Total 3.9 Key Investment Risks ($000) ($000) ($000) Exploration General 903 764 1,667 Any investment in CDIs for Shares or other securities in the Company should be considered speculative Exploration Drilling 1,248 1,100 2,348 because of the nature of the business activities of the Administration 501 376 877 Company and its Indonesian Partners and the stage of development of the Projects. Many of the risk factors Retire Macquarie Facilities 3,868 ‑ 3,868 associated with the Company’s and its Indonesian Expenses of Issue 1,071 ‑ 1,071 Partners’ business and its involvement in the exploration SECTION THREE and minerals industry in Indonesia are largely beyond the General Working Capital 84 85 169 control of the Company and its Directors. Total 7,675 2,325 10,000 (a) New Legal Regime It is noted that up to $3,868,000 of the funds raised will be used to retire facilities provided by Macquarie. A new legal regime governing all aspects of exploration and mining in Indonesia, including licensing, came 3.7 Macquarie Facilities into effect on 12 January 2009. As at the date of this Prospectus, the Indonesian Government has not yet On 24 September 2007, the Company entered into a published implementing regulations on the change bridge to equity facility agreement with Macquarie which from the authorisation/licensing system under the old is secured by way of a fixed and floating charge over all mining law to the authorisation/licensing system under the assets of the Company. The Facility may be drawn the New Mining Law regime. up to a maximum of US$3,000,000 and is currently fully drawn (being approximately $3,570,000). While the Indonesian mining regulatory system is currently in a state of flux, there is no guarantee that the various The Company must repay all amounts outstanding authorisations and rights to obtain new authorisations under this facility on the earlier of:
For personal use only use personal For constituting the Projects will be able to move from the old to the new licensing regime. The Company and its (a) 30 days after the Company receives any proceeds Indonesian Partners are working diligently to transition from the Offer; and the current authorisations and rights to obtain new (b) 30 September 2009. authorisations into the New Mining Law. In the event that any disruption occurs in transitioning any authorisation, the Company will cease expenditure on that authorisation until the matter is resolved.
SUMATRA COPPER & GOLD plc PROSPECTUS 7 Investment Summary Cont.
While the Company and its Indonesian Partners have open to a degree of uncertainty and interpretation diligently investigated the authorisations and their by the Indonesian Courts. As such, there may be rights to obtain authorisations in relation to the difficulties enforcing the provisions of the Co‑operation Projects and, to the best of the Company’s knowledge, Agreement should it ever be challenged. the terms and conditions of the authorisations and the conditions to obtain new authorisations in respect Regardless of the legal enforceability of any of all of the Projects have been complied with, this agreements with its Indonesian Partners, maintenance should not be construed as a guarantee that the of a genuinely co‑operative and constructive authorisations will not be challenged or impugned by relationship between the Company and its Indonesian third parties. Partners will be crucial to the security of the Company’s interests. An adverse change in this relationship (b) Disputed Claim could have significant adverse consequences on the Company’s interests. There is an ongoing legal dispute involving a KP mining licence that was granted to a third party in an area Investors are encouraged to read Section 10 which sets overlapping with the Bengkulu SIPP area covering the out what the Company sees as the material risk factors Lebong project site. Although the Company believe that may have an adverse effect on the Company and that the competing KP mining licence in dispute its Indonesian Partners’ business. was not validly issued, the process of resolving this matter may take considerable time and cost and 3.10 Indicative Timetable may ultimately need to be decided by the Indonesian Supreme Court. There is no guarantee that this will Indicative Timetable Date result in a satisfactory resolution for the Company and Lodgement of Prospectus its Indonesian Partners and no funds raised under the with the ASIC 25 August 2009 Offer will be expended on exploration in this area until the matter has been resolved. Opening Date 2 September 2009 Closing Date 5.00pm WST on (c) Reliance on Co‑operation Agreement and 16 September 2009 Indonesian Partners Despatch of Holding
SECTION THREE The Company is reliant on its Indonesian Partners Statements 25 September 2009 (particularly Adi Sjoekri) and the Co‑operation Expected date for listing Agreement to secure and maintain its interest in the on ASX 30 September 2009 Projects, particularly in the early stages of each Project. The main obligations and duties under the Cooperation The above dates are indicative only and may change Agreement between the Company and the Indonesian without notice. The Company reserves the right Partners are to co‑operate with each other in the to extend the Closing Date or close the Offer early
achievement of certain goals, which would likely be without notice. For personal use only use personal For
8 SUMATRA COPPER & GOLD plc PROSPECTUS Investment Summary Cont.
3.11 Existing Capital Structure 3.12 Pro‑forma Capital Structure
Since incorporation, the Company has raised a total The pro‑forma capital structure of the Company following of £7,659,298 (net of all fees) from private investors. completion of the Offer is summarised below: The funds have been used to acquire the interests in tenements and to undertake exploration activities on Full Minimum the project areas. Subscription Subscription
The existing capital structure of the Company at the Shares Number Number date of this Prospectus is summarised below: Shares on issue at date of Prospectus 65,448,252 65,448,252 Securities Number Shares to be issued Shares on issue at date of Prospectus 65,448,252 under the Offer 60,000,000 50,000,000 Other Securities Shares to be issued Employee Share Plan Options on issue on completion of 1 at date of Prospectus1 10,960,000 the Offer 2,038,450 2,038,450 Macquarie vested Options on issue at Total 127,486,702 117,486,702 date of Prospectus2 6,250,000 Other Securities Macquarie Warrants on issue at date Employee Options of Prospectus3 50,000 on issue at date of 2 Mirabaud Warrants on issue at date Prospectus 10,960,000 10,960,000 of Prospectus4 1,483,750 Macquarie vested Options on issue at date of Prospectus3 6,250,000 6,250,000 Existing Major Shareholders Macquarie Warrants Macquarie Bank Limited 19.5% on issue at date of Alan Robert Flint 10.5% Prospectus4 50,000 50,000 SECTION THREE St Peter Port Capital 8.5% Mirabaud Warrants on issue at date of Nortrust Nominees Limited (a/c JPT01) 6.6% Prospectus5 1,483,750 1,483,750 Jocelyn Severyn de Warrene Waller 6.5% Total 146,230,452 136,230,452 AM2 (Bermuda) Limited 6.1% Notes: Notes: 1 538,450 shares to be issued to directors in lieu of unpaid 1 Exercisable at A$0.20. directors fees at 30 June 2009 and 1,500,000 shares to be issued to parties promoting the Offer. 2 Exercisable at A$0.20. 2 Exercisable at A$0.20. 3 Exercisable at £0.15. 3 Exercisable at A$0.20. 4 Exercisable at £0.18. 4 Exercisable at £0.15. Full terms and conditions of the Options and Warrants are 5 Exercisable at £0.18. set out in Sections 11.5, 11.6 and 11.7 of this Prospectus. Full terms and conditions of the Options and Warrants are
set out in Sections 11.5, 11.6 and 11.7 of this Prospectus. For personal use only use personal For
SUMATRA COPPER & GOLD plc PROSPECTUS 9 Details of the Offer
4.1 The Offer Cheques should be made payable to “Sumatra Copper & Gold plc ‑ Share Offer Account” and Pursuant to the Offer, the Company invites applications crossed “Not Negotiable”. Completed Application for up to 60,000,000 CDIs for Shares at an issue price Forms must reach one of the above addresses by no of $0.20 each to raise $12,000,000. later than the Closing Date.
The Shares underlying the CDIs for Shares offered The Company reserves the right to close the Offer early. under this Prospectus will rank equally with the existing Shares on issue. 4.5 Allotment
Investors should note that Shares offered under this Subject to ASX granting approval for the Company to Prospectus will trade on the ASX by way of CHESS be admitted to the Official List, allotment of CDIs for Depository Interests (CDIs or CDIs for Shares). Shares offered by this Prospectus will take place as soon as practicable after the Closing Date. Prior to allotment, See Sections 11.2 and 11.3 for a further explanation all application monies shall be held by the Company of CDIs. on trust. The Company, irrespective of whether the The Company reserves the right to accept applications allotment of CDIs for Shares takes place, will retain any to subscribe for CDIs for Shares at the same price as interest earned on the application monies. the Offer that it receives other than pursuant to the The Directors reserve the right to allot CDIs for Shares Offer under this Prospectus. in full for any application or to allot any lesser number or to decline any application. Where the number 4.2 Minimum Subscription of CDIs for Shares allotted is less than the number applied for, or where no allotment is made, the surplus The minimum subscription to be raised pursuant to the application monies will be returned by cheque to the Offer is $10,000,000. applicant within 7 days of the allotment date. If the minimum subscription has not been raised within 4 months after the date of this Prospectus, the Company 4.6 ASX Listing will either repay all application monies in full or will issue
SECTION FOUR a supplementary or replacement prospectus and allow The Company will apply to ASX within 7 days after applicants one month to withdraw their applications and the date of this Prospectus for admission to the be repaid their application monies. No interest will be Official List and for Official Quotation of the CDIs paid on these monies. for Shares offered under this Prospectus. If ASX does not grant permission for Official Quotation of the 4.3 Oversubscriptions CDIs for Shares within 3 months after the date of this Prospectus, or such longer period as is permitted by No oversubscriptions will be accepted by the Company. the Corporations Act, none of the CDIs for Shares offered by this Prospectus will be allotted or issued. 4.4 Applications In that circumstance, all applications will be dealt with in accordance with the Corporations Act. Applications for CDIs for Shares under the Offer must be made using the Application Form. 4.7 Applicants Outside Australia
Payment for the CDIs for Shares must be made in full This Prospectus does not, and is not intended to, at the issue price of $0.20 per Share. Applications for constitute an offer in any place or jurisdiction, or to any CDIs for Shares must be for a minimum of 10,000 CDIs person to whom, it would not be lawful to make such for Shares and thereafter in multiples of 1,000 CDIs an offer or to issue this Prospectus. The distribution of for Shares. Completed Application Forms and this Prospectus in jurisdictions outside Australia may be accompanying cheques must be mailed to: restricted by law and persons who come into possession of this Prospectus should seek advice on and observe For personal use only use personal For Argonaut Securities Pty Limited any such restrictions. Any failure to comply with such GPO Box 2553 restrictions may constitute a violation of applicable PERTH WA 6001 securities laws. No action has been taken to register or delivered to: or qualify the CDIs for Shares or otherwise permit a public offering of the CDIs for Shares the subject of this Argonaut Securities Pty Limited Prospectus in any jurisdiction outside Australia. Level 30, Allendale Square 77 St Georges Terrace It is the responsibility of applicants outside Australia PERTH WA 6001 to obtain all necessary approvals for the allotment
10 SUMATRA COPPER & GOLD plc PROSPECTUS Details of the Offer Cont.
and issue of the CDIs for Shares pursuant to this register of legal title and the two uncertified CDI Prospectus. The return of a completed Application sub‑registers will make up the register of beneficial title Form will be taken by the Company to constitute a of the Shares underlying the CDIs. representation and warranty by the applicant that all relevant approvals have been obtained. 4.11 Risk Factors
The Offer pursuant to an electronic version of the Prospective investors in the Company should be aware Prospectus is only available to Australian residents accessing that subscribing for CDIs for Shares the subject of this an electronic version of this Prospectus within Australia. Prospectus involves a number of risks. These risks are set out in Section 10 of this Prospectus and investors 4.8 Not Underwritten are urged to consider those risks carefully (and, if necessary, consult their professional adviser) before The Offer is not underwritten. deciding whether to invest in the Company. 4.9 Commissions Payable The risk factors set out in Section 10 of this Prospectus, and other general risks applicable to all investments The Company will pay the Broker, Argonaut Securities Pty in listed securities not specifically referred to, may in Limited (AFSL 274 099) a commission of 5% (exclusive of the future affect the value of the CDIs for Shares. goods and services tax) of the total amount raised under Accordingly, an investment in the Company should be the Offer. Out of the commission Argonaut Securities considered highly speculative. Pty Limited may pay other licensed securities dealers in respect of any valid applications lodged and accepted by 4.12 Queries the Company bearing the stamp of that licensed securities dealer or Australian financial services licensee. This Prospectus provides information for investors to decide if they wish to invest in the Company and 4.10 CHESS should be read in its entirety. If you have any questions about investing in the Company, please contact your The Company will apply to participate in the Clearing stockbroker, financial planner, accountant, lawyer or House Electronic Subregister System (CHESS). CHESS is independent financial adviser.
operated by ASX Settlement and Transfer Corporation SECTION FOUR Pty Ltd (ASTC), a wholly owned subsidiary of ASX, 4.13 Restricted Securities in accordance with the Listing Rules and the ASTC Settlement Rules. Subject to the Company being admitted to the Official List, CDIs for Shares issued prior to the Offer to The jurisdiction in which the Company is incorporated promoters, vendors, seed capital investors and others does not recognise the CHESS system of holding shares are likely to be classified by ASX as restricted securities or electronic transfer of legal title. To facilitate trading and may be required to be held in escrow for a period on ASX, the Company will have uncertificated CDIs of time determined by the ASX. issued over its Shares as an alternative to holding UK registered share certificates. Investors cannot trade 4.14 Withdrawal Shares on ASX unless they are held in the form of CDIs. CDIs are frequently used for trading foreign The Directors may at any time decide to withdraw this company shares on ASX, and trade in a similar manner Prospectus or the Offer, in which case the Company will to ordinary shares. Each CDI represents one underlying return all Application Monies without interest within share. See Sections 11.2 and 11.3 for an explanation 28 days of giving notice of withdrawal. of CDIs.
Under CHESS, the Company will not issue certificates 4.15 Dividends to investors. Instead, holders of CDIs for Shares will At the time of issue of this Prospectus no dividend has receive a holding statement showing the number of been forecast by the Board and none is anticipated for For personal use only use personal For underlying Shares issued. the foreseeable future. The Company operates a certified UK register of The Directors consider that at this stage of the Shares. On admission to CHESS, the Company will Company’s development they are unable to provide also operate an electronic uncertified issuer‑sponsored potential investors with reliable revenue, profit or cash sub‑register of CDIs and an electronic uncertified flow forecasts. The Directors will assess the ability CHESS sub‑register of CDIs in Australia. The two to pay dividends, if and when deemed appropriate sub‑registers together will make up the Company’s to the Company’s circumstances, as the Company register of CDI holders. The certified register is the further develops.
SUMATRA COPPER & GOLD plc PROSPECTUS 11 Company and Project Overview
5.1 Background recent polymetallic (gold, silver, lead, zinc and copper) discovery with no prior production history. Rights to the The Company was incorporated as Centredune Sontang Project are based on a mining business permit Limited in England and Wales on 11 April 2006. (Exploration IUP) granted under the New Mining Law. The Company having changed its name by special resolution was re‑registered as Sumatra Copper & Gold It is the Company’s intention, together with its Limited on 26 May 2006. The Company converted Indonesian Partners, to evaluate, explore and to a public limited company, limited by shares and potentially develop the majority of the Projects, as well was re‑registered as a public limited company on as evaluate and acquire additional prospective areas 3 July 2008 and changed its name to Sumatra within Indonesia. Copper & Gold plc. 5.2 Why Indonesia? The Company’s strategy is to establish a successful Indonesian focused exploration Company. The Company Indonesia is an archipelago of more than and its Indonesian Partner have interests in seven 17,000 islands straddling the equator in south‑east mineral authorisations and an additional large area Asia, with Sumatra located at the north western in respect of which an application and “agreement end. The country has 33 provinces sub‑divided into in principle” has been conferred together totalling regencies and cities, collectively the key administrative 6,050 km2. The authorisations include three gold‑silver units responsible for providing government projects that were previously in production and the areas services. Indonesia is a developing nation with an adjacent to these old mines. estimated population of 238 million people, who are predominantly Muslim with an estimated GDP per The three gold‑silver projects comprise Tembang, capita of US$3,400. The country is a republic with a Tandai and Lebong, with the latter consisting of two democratically elected President who is both chief of geographically adjacent former Dutch mines, Donok state and head of government. and Tambang Sawah. The fourth project, Sontang is a
SECTION FIVE For personal use only use personal For
Figure 1: Location map showing the Company’s Projects, Indonesian copper and gold mines
12 SUMATRA COPPER & GOLD plc PROSPECTUS Company and Project Overview Cont.
In 2008, Indonesia was the world’s seventh largest To date, the activities of the Company and its Indonesian gold producer, with production of some 116 tonnes. Partners have been focused on the island of Sumatra. Minerals and related products are some of Indonesia’s most important sources of foreign currency, Sumatra is one of the largest islands in the Indonesian contributing 19% of the country’s exports. archipelago, and has a long history of gold mining dating back to the time of Indian trading activity The country is home to one of the world’s largest approximately 1,000 years ago. While under Dutch gold mines, Freeport‑McMoRan Copper & Gold Inc.’s administration the country’s largest gold mines were Grasberg operation in Irian Jaya (Figure 1) where underground operations on the high‑grade Donok and gold production is a by‑product of copper mining. Tandai epithermal vein deposits in Sumatra (Figures Other mining operations include PT Newmont Nusa 2, 3 and 4). Both of these mines lie within a SIPP Tenggara’s Batu Hijau copper‑gold mine in West granted to the Company and its Indonesian Partner. Sumbawa and Newcrest Mining Limited’s Gosowong Most precious metal production from the area was gold mine on Halmahera Island. by Dutch companies, dating from the early 1900s until the Japanese occupation of Sumatra in 1942, In 2006, when the Company started investing in with approximately 3.0 million ounces of gold and Indonesia, the Directors considered that the level of 25.0 million ounces of silver reported to have been foreign activity in the exploration sector was relatively produced. Mining and exploration was interrupted low, which provided a good opportunity for the by World War II and the subsequent turbulent Company, in co‑operation with its Indonesian Partner, years accompanying and postdating Indonesia’s to obtain mineral rights over extensive prospective areas. independence struggle.
SECTION FIVE For personal use only use personal For
Figure 2: Location of the Sontang, Tembang, Tandai and Lebong Projects
SUMATRA COPPER & GOLD plc PROSPECTUS 13 Company and Project Overview Cont.
5.3 Overview of Old and New Mining such PMA mining companies will eventually be subject Regulatory Licensing Framework in to the divestment provisions under the New Mining Law, which will take effect as of the 5th year after commercial Indonesia production has commenced. Although the regulations The old mining regime was established by Law No.11 of to specify the amount of divestment have not yet been 1967 on the Basic Provisions on Mining (the Old Mining issued, there have been indications in the media that the Law). Even though a new legal regime governing interest of a foreign party in such mining PMA mining all aspects of exploration and mining in Indonesia, company will need to be reduced to a maximum of th including licensing, came into effect on 12 January 2009 80% over a period of 4 years after the 5 year of the (the New Mining Law), the Old Mining Law remains of commencement of commercial production. importance. This is because the Indonesian Government As the New Mining Law embraces a one year transition has not yet published implementing regulations on the period (expiring 12 January 2010), the Company and change from the authorisation/licensing system under its Indonesian Partners are committed to changing the Old Mining Law to the authorisation/licensing the current arrangements under the Co‑operation system under the New Mining Law. Consequently, Agreement (described below) in order to reflect the mining activities licences and permits granted under the ability of the Company to have direct equity holdings Old Mining Law have continued to be recognised. in such PMA mining companies (and other matters). A summary comparison of the Old Mining Law regime The Company and its Indonesian Partners have agreed and the New Mining Law regime as well as an analysis to make such changes to the Co‑operation Agreement of the authorisations underlying the Projects is set as soon as practicable after the regulations to the New out in S&T’s Abridged Legal Report in Section 8 of Mining Law have been passed. this Prospectus. For those Projects where the relevant mining In their Abridged Legal Report, S&T note that although authorisation had to be held by the Indonesian Partners the mining regulatory system is currently in a state of under the Old Mining Law (e.g. the KP holdings in the Tembang Project), the Co‑operation Agreement currently SECTION FIVE flux, “grandfathering” provisions referred to in the New Mining Law and recently issued official circulars contemplates that the Company will establish a wholly give reasonable comfort that various authorisations owned mining services company that will enter into a constituting the Projects in which the Company has an contractual relationship with the relevant Indonesian interest, will be able to move from the old to the new Partner to develop the relevant mine and have 92.5% of licensing regime and that the holders of the various the economic benefit of the mine, with the Indonesian authorisations have done all that they are reasonably partners having a 7.5% economic benefit. able to do in the absence of specific regulations in The above arrangements are contemplated to be order to comply with the New Mining Law. replaced upon the amendment of the Co‑operation Agreement so that a mining services company will 5.4 Nature of Acquisitions and Asset no longer be required and the Company will be able Holding Structure to have an initial direct interest of 92.5% in a PMA mining company that will hold the relevant IUP under Through the Co‑operation Agreement the Company the new licencing regime. and its Indonesian Partners have agreed to co‑operate in identifying and developing suitable exploration For those projects where a mining licence may be held and mining projects in Indonesia and establishing jointly by an Indonesian partner and the Company appropriate ‘mining investment vehicles’ to hold (e.g. Lebong and Tandai), the Company and the relevant mining licences. The Co‑operation Agreement Indonesian partners will jointly establish a PMA mining contemplates that the Company will hold up to a company in which they will have initial interests of 92.5% interest in each ‘mining investment vehicle’. 92.5% and 7.5% respectively.
For personal use only use personal For The remaining interest of 7.5% in the projects is held by the Indonesian Partners. In response to certain letters dated 6 July 2009 issued by the Director General of Minerals Coal As a consequence of the New Mining Law, and Geothermal, the Indonesian Investment non‑Indonesian parties can now directly hold equity in Coordinating Board (BKPM) issued formal approvals on an Indonesian limited liability mining company (PMA) 6 August 2009 for the establishment of 4 PMA mining that is able to hold a mining exploration or exploitation companies by the Company and its Indonesian Partner licence (IUP). The Company will initially hold a direct (NPM) under the New Mining Law, which are upon interest of up to 92.5% of the equity in such PMA mining establishment, intended to be used as the relevant companies. The maximum interest of the Company in vehicles to hold IUPs.
14 SUMATRA COPPER & GOLD plc PROSPECTUS Company and Project Overview Cont.
The Company is required to provide funding to its historical holes, resource infill and extension drilling. Indonesian Partners in relation to the Indonesian Some of this data was used in estimation of Mineral Partners’ share of total project expenditures (such total Resources and an Ore Reserve, estimated and reported amounts as determined by the Company in its sole using industry best practice using the guidelines JORC discretion) by way of a loan to the relevant Indonesian code (2004). Partner but is entitled to be repaid those loans (plus interest) from 90% of the profits of any future mining Based on historical data acquired by the Company operations at the projects that would otherwise be and its Indonesian Partners, studies and drilling carried attributable to the Indonesian Partners. out by the Company and its Indonesian Partners, it is apparent that potential remains at each of the The above information on the Company’s and its previously mined deposits. The Tembang Project Indonesian Partners’ corporate and asset holding and the Lebong Project are considered as advanced structure should be read in conjunction with S&T’s exploration and survey projects respectively, with good Abridged Legal Report in Section 8 of this Prospectus. potential for re‑development after completion of the relevant feasibility studies. Of the resources tabulated 5.5 Overview of Projects below, Tembang was independently estimated by Snowden Mining Industry Consultants as part of A summary of the Projects is provided below. a Pre‑Feasibility Study (PFS) that was concluded This should be read in conjunction with the more in May 2009. comprehensive details on the Project’s technical aspects and the Abridged Legal Report as set out in the Independent Technical Report, the executive summary of which is set out in Section 7 and the Abridged Legal Report, an abridged version of which is set out in Section 8 of this Prospectus respectively.
The Company together with its Indonesian Partners SECTION FIVE have interests in authorisations over a range of areas that include JORC compliant mineral resource estimates at Tembang and Lebong, a multi‑million ounce target at Tandai, to a polymetallic discovery at Sontang. The environs of old mines represent an opportunity for exploration with an enhanced chance of success.
This is reflected in the magnitude of the Company’s resources and exploration targets which are either within or immediately adjacent to the old mine workings. The exception is Sontang, which is a new discovery by the Indonesian Partners, in co‑operation with the Company and therefore has not previously been mined. The available data suggests potential for the development of open pit bulk mining at Tembang, Figure 3: Historical photos of Tandai gold plant and the hill of Lebong Baru mined by the Japanese for copper. Lebong and Tandai. Underground potential also exists Dutch production totalled 1.4 million ounces of gold. at Lebong and Tandai.
The Company and its Indonesian Partners have been active since 2006, acquiring rights to mining areas and conducting surface and underground mapping,
trenching, geochemical and geophysical surveys, and For personal use only use personal For substantial drilling programs including twinning of
SUMATRA COPPER & GOLD plc PROSPECTUS 15 Company and Project Overview Cont.
Summary of Mineral Resources estimates reported to JORC Code standards SECTION FIVE
Notes:
1 Rounding errors may occur. The net attributable to Sumatra amounts to 92.5% of the gross Mineral Resource. The cut‑off grade for Tembang is 0.5g/t gold for the vein mineralisation and 0.35g/t gold for the halo mineralisation. The cut‑off grade for Tambang Sawah and Donok are 0.35g/t gold. The Tembang Mineral Resource was estimated by Mr Matthew Nimmo MAusIMM of Snowden Mining Industry Consultants (Mr David Stock MAusIMM who is a Geological Consultant to Sumatra provided the geological interpretation and QA/QC validation). The Donok and Tambang Sawah Mineral Resources were estimated by Mr David Stock. Both Mr Nimmo and Mr Stock are Competent Persons as defined by the Australasian Code for the reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code 2004 Edition) and consent to the inclusion in this report on the matters based on their information in the form and context in which they appear.
2 The net attributable to the Company is assumed to be 92.5% of the gross Mineral Resource. However, the New Mining Law contains a provision which states that 5 years after the commencement of commercial production, foreign holders of interests in
For personal use only use personal For an Indonesian mining licence holding company are required to divest a percentage of their interest. Regulations setting out the percentage of required divestment have not yet been passed. However, current indications are that, commencing on the 5th year after the commencement of commercial production, foreign interests must be reduced over a 4 year period so that the foreign interests in the relevant Indonesian mining licence holding company can be no greater than 80%. To date, such regulation has not been issued and could specify a different percentage to be divested and/or a different time period for completion of the divestment process.
16 SUMATRA COPPER & GOLD plc PROSPECTUS Company and Project Overview Cont.
The four projects’ exploration potential is summarised The Company and its Indonesian Partners have in each of the sections below. The magnitude of the acquired the existing comprehensive data‑sets which targets at Tandai and Lebong reflects the interplay of include airborne geophysics, 128,000 metres of RC and proximity to old mines, and the historic high cut‑off diamond drilling, soil geochemistry, topography and grades resulting in considerable potential remaining in previous production records. these geologic systems. From the work conducted by the Company and its (a) Tembang Project Indonesian Partners, the potential exploration targets are reasonably well understood and include more than Tembang is an abandoned mine with a recent 9.0 million cubic metres of dumps dominated by halo exploration history dating back to the 1980s. mineralisation mined and discarded by the last operator. The Company and its Indonesian Partners hold various rights to an area of about 800 km2 over Tembang is the most advanced of all the Company’s and around the old mine‑site, and these are host to Projects. Snowden Mining Industry Consultants known partially‑explored epithermal gold‑silver and (Snowden) have undertaken a Pre‑Feasibility Study copper‑gold porphyry systems and reflect extensions and the executive summary of their report is appended of the historically important goldfields of Bengkulu. to the Independent Technical Report (ITR).
Tembang is a large low‑sulphidation epithermal deposit The PFS level of accuracy is +/‑ 20% and investigated comprising gold‑silver bearing quartz sulphide veins the potential to upgrade the halo mineralisation by hosted by Tertiary volcanics. Two vein styles (Figure 4) simple beneficiation as part of a future mining operation. are present; a relatively wide and continuous vein set Approximately half of Tembang’s resource is represented surrounded by irregular narrower veins that occur in by halo material and the ability to economically recover both the footwall and hanging‑wall providing a “halo” gold from this material encouraged the Company to of mineralisation peripheral to the main veins. identify whether there are economies of scale related to higher processing rates. The historic mine commenced production under a previous operator in late 1997 and ceased production The PFS revealed that the beneficiation of the halo in March 2000 due to a declining gold price. The prior mineralisation is conceptually feasible and offers SECTION FIVE operator mined only the main veins and discarded the economies of scale from larger processing rates. lower grade halo mineralisation. Throughputs of up to 2.5 Mtpa were considered which forecast an average 120,000 ounces of gold would be
produced annually for approximately eight years. For personal use only use personal For
Figure 4: Snowden resource model showing distribution of main veins, and peripheral halo
SUMATRA COPPER & GOLD plc PROSPECTUS 17 Company and Project Overview Cont.
Snowden concluded: of Belinau, Bujang and Buluh. Up to 1,500 metres of diamond drilling has been budgeted for the testing of “The Tembang Project has the potential to develop as additional outlying targets. an operational mine if the gold and silver prices are at current market prices and metallurgical recoveries Drilling will commence in 2009, and the results will are confirmed as favourable. Increasing the halo and be integrated with those developed under the PFS to vein mineralisation and to Indicated Mineral Resources ensure any future operation is optimised at the most and vein mineralisation to Measured Mineral Resource appropriate rate of production. will produce larger resources for economic evaluation. Additional drilling is recommended to achieve this.” (b) Sontang Project and “… the project is one in which there are multiple scenarios and the resultant flexibility will likely result in Rights of the Company’s Indonesian Partner (NPM) the identification of further upside.” to hold mining authorisations over 6,050 km2 were acquired not only for the existing epithermal gold/silver The Company and its Indonesian Partners plan to potential but also for the potential to find porphyry increase the resource base by focusing on exploration systems (analogous to the Philippines) that historical targets where higher grades are anticipated at relatively exploration had overlooked due to the focus on shallow depths. A 3D Datamine model of geology and gold‑silver. Sontang is held within an Exploration IUP, mineralisation will be constructed to orient geological which is valid for six years, and comprises one of the mapping and geochemical sampling of targets adjacent first exploration licences to be granted under the New to the planned pits. The Company and its Indonesian Minerals Law. Partners plan to drill approximately 5,000 metres of combined diamond and RC drilling to test along‑strike Sontang comprises the virgin discovery of a poly‑metallic and down‑dip extensions to the current mineral manto (Figures 5 and 6). Hydrothermal alteration and resource in expectation of enlarging the conceptual mineralisation is dispersed over an area extending pits outlined in the PFS. Drilling will focus on the areas approximately 1.5km along strike (Figure 6).
SECTION FIVE For personal use only use personal For
Figure 5: Sontang, initial gold and silver results
18 SUMATRA COPPER & GOLD plc PROSPECTUS Company and Project Overview Cont.
Elevated values of gold, silver and base metals (zinc, The weighted‑average for metal content received lead and copper) were frequently encountered during from 54.8 meters of sawn rock‑channel samples is rock chip sampling with maximum values of 24.5 g/t 2.87 g/t gold, 118 g/t silver, 0.57% lead and 5.66% zinc. gold, 1,000 g/t silver, 12.2% lead and 30.8% zinc. Several styles of mineralisation and alteration have Phase 1 of the Company’s proposed work program will been identified with a zonation suggestive of a include the evaluation of the discovery by completing temperature gradient increasing north‑westwards geochemical sampling of the surrounding drainages where an intrusive source is interpreted (Figure 6). to define the extent of the system. Soil sampling will be conducted in the most anomalous drainages and The manto is hosted by a calcareous sequence geophysics will be applied selectively over the most which occurs throughout the mineralised areas. geochemically anomalous areas to further define Most significant mineralisation identified so far targets for a minimum 1,000 metre drilling program to comprises massive sulphides interpreted to represent commence late 2009. Subject to the results of Phase “manto style” mineralisation. 1 providing sufficient information to efficiently site additional diamond drill‑holes and the proposed work Geological mapping indicates several receptive program meeting relevant budgeting requirements, stratigraphic horizons to be mineralised with true Phase 2 of the work program will commence. Phase thickness of up to 5 metres of massive sulphides. 2 will include a further 3,500 metres of drilling and Fieldwork indicates the manto to be best‑developed at a ground time‑domain electromagnetic survey and the south‑eastern end, and systematic detailed work down‑hole geophysics may also be applicable. has commenced in this East Sontang area.
SECTION FIVE For personal use only use personal For
Figure 6: Sontang interpretive geology and exploration target
SUMATRA COPPER & GOLD plc PROSPECTUS 19 Company and Project Overview Cont.
(c) Lebong Project Together with its Indonesian Partners, the Company has conducted work on two of the former The Lebong Project, which includes two underground gold‑silver mines within the district, under‑explored mines (Donok and Tembang Sawah), Donok which produced.1.34 million ounces of gold lies approximately sixty kilometres to the west of and 7.4 million ounces of silver at a grade of 12.8 g/t Tembang within a large Dutch mining district within gold, 70.5 g/t silver and Tambang Sawah eight 2 the 2,500 km Bengkulu SIPP. kilometres to the north. The Company’s objective is to identify and develop resources potentially amenable to open‑pit mining in the vicinity of the old mines.
SECTION FIVE For personal use only use personal For
Figure 7: Donok model from Dutch data, showing distribution of historic grades
20 SUMATRA COPPER & GOLD plc PROSPECTUS Company and Project Overview Cont.
The Donok prospect is a high‑grade low‑sulphidation intercepts of 29.9 metres at 1.4 g/t gold, 5.1 g/t silver; gold‑silver epithermal system (Figure 8) hosted in both 9.0 metres at 2.4 g/t gold, 15.1 g/t silver and 7.4 metres veins and breccias. The mineralisation is spatially‑related at 2.3 g/t gold, 1.1 g/t silver. This is a high‑priority target to a pre‑mineral intrusive (“dacite”) that influenced local as the mineralisation has significant width, is at shallow stresses at the time of mineralisation. depth, and favourably located adjacent to a dacite. The structure may be analogous to the high‑grade The Dutch mined the deposit underground to a Donok vein (Figure 8) and has not yet been drilled. cut‑off grade of approximately 7 g/t gold. Mining was restricted to 300 metres of strike (Figure 9) where 4,108 metres of drilling in 25 holes in the vicinity of grade was highest, which ceased in about 1939. the Donok vein and its along‑strike extensions has At cessation, level plans show average grades of already been completed. A mineral resource has been 7.6 g/t gold still being recovered from Levels 11 and estimated that is open in all directions. The wide drill 12 (Figure 8). Several types of veining are present, spacing plus uncertainty as to the extent of the Dutch but historical production was from a single wide stoping means the resource is classified as Inferred. structure in the hanging wall to the Donok intrusive. Mineralisation is thought to extend over 1.6 kilometres The Dutch mine data allowed the construction of a of strike and to locally continue to surface. 3D geological model which the Company’s drilling to date has demonstrated to be accurate and reliable. The model The property was partially drilled in the 1980s and identifies a second dacite body (Boenoet dacite) at 1990s and the results are detailed in the appended depth which does not come to surface. A 1.3 kilometres Independent Technical Report. That exploration long Dutch exploration drive on the penultimate level included extensive geophysics, which identified a (number 11) intersected and investigated breccias proximal footwall structure parallel to the mined Donok vein. to this Boenoet dacite which are understood to be similar to mineralised breccias proximal to the Donok dacite At surface the new structure is obscured by a veneer (Figure 9). Assuming mineralisation style is similar, these of post‑mineral cover and remained undetected to the breccias represent a substantial exploration target. Dutch miners. Results of a single drill hole returned
SECTION FIVE For personal use only use personal For
Figure 8: Donok model from Dutch data, showing limited extent of historic mining
SUMATRA COPPER & GOLD plc PROSPECTUS 21 Company and Project Overview Cont.
SECTIONFigure FIVE 9: Donok exploration target in the mine’s lower levels at Donok and Boenoet
At Donok, Dutch data identifies two large breccia At Tambang Sawah (Figure 10) the geology is bodies adjacent to the dacites representing a complicated by structure related to the nearby Trans +4 million ounce gold exploration target (Figure 9). Sumatra Fault. The mineralisation comprises veins, As the breccias are at depth, the shallower footwall which are commonly crustiform‑banded, hosted within target, which may mirror the main Donok vein, will be broad zones of lower‑grade breccias. evaluated first. The Tambang Sawah mineralisation is open in most directions with potential to extend the Fourteen diamond holes totalling 1,361 metres have current resource along‑strike and down‑dip. been drilled by the Company and intersections include 28.8 metres at 4.6 g/t gold close to surface. The Tambang Sawah prospect is an abandoned mine eight kilometres to the north of Donok. The mineralisation is also epithermal and of a low‑sulphidation nature but is less well‑understood
than Donok. For personal use only use personal For
22 SUMATRA COPPER & GOLD plc PROSPECTUS Company and Project Overview Cont. SECTION FIVE Figure 10: Tambang Sawah cross section showing the distribution of mineralisation
The database for the Lebong Project is sufficiently It should be noted there is an ongoing legal dispute comprehensive for there to be confidence in the involving a exploitation KP mining licence that was exploration target potential for this old mining district. granted to a third party in an area overlapping with The data comprises drill results from prior explorers, the Bengkulu SIPP area covering the Lebong project airborne magnetics, soil and drainage geochemistry site. Although the Company and its Indonesian lawyers and the results of the extensive Controlled Source believe that the competing exploitation KP licence in Audiomagnetotellurics survey. There are a number of dispute was not validly issued, the process of resolving other Dutch workings in addition to those referred this matter may take considerable time and cost and to above, however the Company and its Indonesian may ultimately need to be decided by the Indonesian Partners are focused on the most significant Supreme Court. Brief details of the dispute are exploration targets currently known within and contained in the Abridged Legal Report presented in adjacent to the workings. Section 8 of this Prospectus. Future exploration will be
deferred until the dispute has been resolved. For personal use only use personal For
SUMATRA COPPER & GOLD plc PROSPECTUS 23 Company and Project Overview Cont.
(d) Tandai Project district. The mine was re‑opened temporarily in 1986 and during 6 years of operations, a further 150,000 Tandai, like Lebong, represents an under‑explored ounces of gold were produced. historical mining district. During the colonial era, at least three Dutch companies were operating on Despite the long history of production a multi million adjacent lands. Tandai lies within the same 2,500 km2 ounce exploration target potential remains as work SIPP as Lebong, and the Company and its Indonesian conducted by the Company and its Indonesian Partners Partner, NPM, have commenced the process of demonstrates the Dutch to have exploited a modest transitioning the tenement into a separate exploration portion of the large geologic system. licence (IUP) under the New Mining Law. The first objective of the Company and its Indonesian Tandai is a high‑grade, epithermal, Partners is to identify open‑pittable resources in the intermediate‑sulphidation system with gold‑silver vicinity of the old underground mines. Current informal mineralisation hosted by a series of veins distributed activity is at, or close to, the surface and indicates that over a vertical extent exceeding 500 metres. these objectives are realistic. Dutch production records The deepest levels of the mine were still in production identify that approximately 1.0 million ounces of the when abandoned during the Japanese invasion of high‑grade gold‑silver mined was recovered solely from WWII. Historic Dutch production totalled 1.4 million the Tandai vein and this represents only 15% of the ounces of gold and 15 million ounces of silver at a strike‑length of veining identified by the Company’s grade of 15.4 g/t gold, and 167 g/t silver. During WWII geologists (Figure 11). the Japanese focused on recovering copper from the
SECTION FIVE For personal use only use personal For
Figure 11: Extent of the Tandai epithermal system and prior mining activity
24 SUMATRA COPPER & GOLD plc PROSPECTUS Company and Project Overview Cont. SECTION FIVE Figure 12: Long section through the former Tandai underground mine
Work conducted by the Company and its Indonesian A modest amount of sampling has been conducted at Partners to date includes geological mapping, soil the latter and encouraging gold values have already and drainage geochemistry, trenching, development been identified at surface above the underground of a 3D geological model, ground magnetics and a workings. Figure 12 depicts the extent of identified modest programme of diamond drilling. Surface and veining and breccias identified by the Company, and underground sampling and drilling in late 2007 confirmed more may be discovered as the system has not been significant gold and silver values in the footwall and fully explored. hanging wall to the old stopes (Figure. 12). This is best demonstrated by drill hole 9A which returned 72.9 metres The Company and its Indonesian Partners’ work has at 1.99 g/t gold (22 metres true width) even though the identified the Tandai system to be larger than previously higher grade gold ore had been extracted by a 2 metre understood. The intermediate‑sulfidation nature of the wide stope intersected in the drill hole. system indicates there is a magmatic component to the system from a buried intrusive. Proximal to this, there Exploration has also confirmed the presence of may be other styles of mineralisation and which might substantial mineralised structures to the north explain molybdenum anomalies in the drainages on the (Toko Rotan) and south (Glumbuk) of the east‑west west side to the system. A large soil anomaly identified corridor hosting the mined veins (Figure 12). by the Company may also reflect an additional style of These two structures were known to the Dutch and a gold‑silver mineralisation on the property.
For personal use only use personal For limited amount of mining was conducted on Glumbuk.
SUMATRA COPPER & GOLD plc PROSPECTUS 25 Company and Project Overview Cont.
Figure 13: Tandai exploration target, extensive highly anomalous soils SECTION FIVE
Due to the size of the geologic system (Figure 13) 5.6 Other Exploration Projects and the limited historical data recovered to‑date, the Company has yet to identify the system’s overall The Company and its Indonesian Partners have an active zonation, and where the centre to the system most program to evaluate and acquire additional prospective probably lies. The main exploration targets lie within precious and base metal properties within Indonesia. and immediately adjacent to the old mine with Any opportunities and their potential fit with this the most prominent being the 3km long Glumbuk overall strategy of the Company will be determined structure, which is parallel to Tandai, and was only once evaluation is complete. The Company has already partially mined from underground by the Dutch. acquired three authorisations, one in Jambi and two in Madina (North Sumatra). While some field work has Work on the Lebong Project has demonstrated the been conducted in relation to Jambi and Madina, the recovery of historic Dutch data can accelerate the Directors do not yet ascribed any material value to them. rate of progress. As much of the Tandai data was lost during a change of ownership, the Company and its Indonesian Partners have recently begun researching archives in Holland and Indonesia to locate historical mining data to advance the project. The Company and its Indonesian Partners intend to conduct further
geochemical surveys to define future drilling targets. For personal use only use personal For
26 SUMATRA COPPER & GOLD plc PROSPECTUS Company and Project Overview Cont.
5.7 Proposed Exploration and Development Plan
Year 1 of the planned exploration strategy will focus on Tembang as the Company and its Indonesian Partners intend to conduct up to 6,500 metres of drilling to increase the resource base. The objective is to increase the total ounces available to be mined from the pits already identified during optimisation studies.
Assuming success in the first phase of drilling, during Year 2 the Company will focus on Sontang. Additional drilling will be conducted to further determine the extent of the massive sulfides associated with the polymetallic manto. This second phase of drilling is expected to total 3,500 metres.
Year 1 Year 2 (A$) (A$) Tembang Drilling and assays 1,008,169 ‑ Environmental (Amdal permit) 156,250 ‑ Land, permitting, community 53,975 54,600 Staff, labour, camp support, travel 581,325 581,325 Consultants 133,875 133,875 Total 1,933,594 769,800 Sontang Drilling and assays 240,000 700,000 Drainage and soil geochemistry 75,000 ‑ SECTION FIVE Ground‑based EM survey 68,750 ‑ Geochem and geophysics interpretation 93,750 ‑ Land, permitting, community 117,680 55,814 Staff, labour, camp support, travel 327,531 327,531 Consultants 89,250 89,250 Total 1,011,961 1,172,595 Lebong Drill test of structure footwall to Donok ‑ 400,000 Acquisition of Dutch data 56,250 ‑ Land, permitting, community 42,175 42,175 Staff, labour, camp support, travel ‑ 163,766 Consultants 63,750 63,750 Total 162,175 669,691 Tandai Holding costs, including Jambi and Madina 36,600 36,600
For personal use only use personal For Acquisition of Dutch data 56,250 ‑ Consultants 31,875 31,875 Total 124,725 68,475 Total for all Projects 3,232,455 2,680,561*
* Application of funds is based on the full subscription amount of $12 million being achieved.
SUMATRA COPPER & GOLD plc PROSPECTUS 27 Company and Project Overview Cont.
TOTAL FOR ALL PROJECTS Year 1 (A$) Year 2 (A$) Drilling and assays 1,248,169 700,000 Drill test of structure footwall to Donok ‑ 400,000 Environmental (Amdal permit) 156,250 ‑ Drainage and soil geochemistry 75,000 ‑ Ground‑based EM survey 68,750 ‑ Geochem and geophysics interpretation 93,750 ‑ Holding costs, including Jambi and Madina 36,600 36,600 Acquisition of Dutch data 112,500 ‑ Land, permitting, community 213,830 152,589 Staff, labour, camp support, travel 908,856 1,072,622 Consultants 318,750 318,750 Total 3,232,455 2,680,561*
* Application of funds is based on the full subscription amount of $12 million being achieved.
The actual expenditure of the Company may vary from the budgeted expenditure above, depending on the circumstances of the Company.
SECTION FIVE For personal use only use personal For
28 SUMATRA COPPER & GOLD plc PROSPECTUS Board and Management
6.1 Directors and Company Secretary Mr Flint has 30 years experience in the industry, commencing his career in Brazil with Rio Tinto. Mr Warwick George Morris From southern Europe he moved to Indonesia joining Newmont Mining in 1986. He spent fifteen years BSc (Hons), MSc, MAusIMM with the company, leading the team that discovered Non‑Executive Chairman Manmanok in the Philippines (now held by Anglo), and gained production experience on the Carlin Trend Warwick Morris is an Australian national who was where he led a team that revised the genetic model for appointed to the board of the Company in March 2008 these multi‑million ounce gold systems. He identified and shortly afterwards took over as Chairman. Mr Morris Balabag in the Philippines for acquisition which will be graduated from Sydney University with a degree in TVI Pacific’s next gold‑silver mine. He lives in SE Asia. Geology and a Master of Science in Geochemistry Research. He is a member of the Australasian Institute of Mining and Metallurgy and has more than 30 years Lord Daresbury experience in the resources industry. MA (Hons) (Cantab) Non‑Executive Director Mr Morris has most recently served as an executive director of Macquarie Bank Limited (‘Macquarie’), where Peter Daresbury is a British national who was appointed he has been both Chairman of the Metals and Energy as a non‑executive Director of Sumatra in July 2007. Capital Division and head of Metals and Mining. In Peter Daresbury graduated from Cambridge University addition he was co‑founder of the Macquarie Energy with a Master of Arts (Hons) in History, and later Capital business, centered in Houston USA. Mr Morris graduated from the London Business School following has also held a directorship with Wine Planet Holdings an executive management program. Ltd, and was, before joining Macquarie, manager of the Mining Division of Minproc Engineers in Perth where Peter Daresbury has served as CEO and Director of he was responsible for managing feasibility studies into a number of publicly listed companies. His recent mining sector experience includes being executive and
numerous gold mining projects around the world. SECTION SIX non‑executive Chairman of Highland Gold Mining and Mr Jocelyn Severyn de Warrenne Waller Kazakh Gold Group respectively. Current directorships include non‑executive chairmanship of Mallett plc, MA (Hons) (Cantab) Nasstar plc and Aintree Racecourse Company Limited. Managing Director
Jocelyn Waller is a British national who is a founder Dr Michael Allan Price shareholder and Director of the Company. Mr Waller CEng, FEANI, BSc, PhD (Mining Engineering) graduated from Churchill College, Cambridge with a Non‑Executive Director Master of Arts in History in 1965 and has since spent his entire career in the mining industry. For 22 years he Dr Michael Price is a British national who was worked for the Anglo American group and was involved appointed as a non‑executive Director of Sumatra variously with tin mining (Malaysia and Thailand), in July 2007. Dr Price qualified with a PhD from the copper/cobalt (Zaire), potash (UK), tungsten (Portugal), University of Cardiff and has over 30 years of mining exploration and metal sales (London). and mining finance experience.
In 1989 he set up Avocet Mining plc (‘Avocet’) and as Dr Price gained financial institution experience at CEO developed the Penjom gold mine in Malaysia and Rothschild, Societe Generale and Barclays Capital. listed Avocet on the London Stock Exchange. In 2000 He is currently a consultant and advisor to Resource he set up Trans‑Siberian Gold (‘TSG’) to develop gold Capital Funds, a resource‑focused private equity fund. projects in Eastern Russia listing TSG on the AIM Additionally, Dr Price has extensive board experience of market of the LSE in 2003. junior mining companies through a number of past and present non‑executive directorships. Mr Alan Robert Flint BSc (Hons), ARSM, Exec MBA, MAusIMM Mrs Alison Barr Company Secretary
For personal use only use personal For Director of Exploration
Alan Flint is a British national who is a founder shareholder Alison Barr is a British national who was appointed and Director of the Company. Mr Flint graduated from as company secretary of Sumatra in December 2006. the Royal School of Mines with honours, the J.L. Kellogg Mrs Barr graduated from University College, Graduate School of Management and the Wharton London with a Bachelor of Laws and qualified as School where he received his Executive Master of a solicitor in 1974. She is head of the Commercial Business Administration. Department at Barr Ellison LLP, Solicitors, who have been legal advisers to Sumatra since December 2006.
SUMATRA COPPER & GOLD plc PROSPECTUS 29 Board and Management Cont.
6.2 Corporate Governance (c) Remuneration Arrangements
The Company’s Board of Directors is responsible for Subject to the Companies Act, the ASX Listing corporate governance of the Company. The Board develops Rules and the Company’s Articles of Association the strategies for the Company, reviews strategic objectives aggregate annual remuneration of Directors must not and monitors performance against the objectives of its exceed £1,000,000. The determination of Directors’ corporate governance process listed below. The objectives remuneration within that maximum will be made by of the corporate governance processes are to: the Board having regard to the inputs and value to the Company of the respective contributions by each Director. • maintain and increase shareholder value; The Board may award additional remuneration to • ensure a prudential and ethical basis for the Non‑Executive Directors called upon to perform Company’s conduct and activities; and extra services or make special exertions on behalf of • ensure compliance with the Company’s legal and the Company. regulatory objectives. The Company has established a Remuneration Consistent with these objectives, the Board assumes Committee consisting of the two Non‑Executive the following responsibilities: Directors, Lord Daresbury and Dr Michael Price. Lord Daresbury is Chairman. • developing initiatives for the augmentation, exploration and development of the (d) External Audit Company’s assets; The Company in general meetings is responsible for the • reviewing the corporate, commercial and financial appointment of the external auditors of the Company, performance of the Company on a regular basis; and the Board from time to time will review the scope, • acting on behalf of, and being accountable to, the performance and fees of those external auditors. Shareholders; and SECTION SIX • identifying business risks and implementing actions (e) Audit Committee to manage those risks and corporate systems to The Company has an Audit Committee consisting of assure quality. the two Non‑Executive Directors, Michael Price and The Company is committed to the circulation of Lord Daresbury. Dr Michael Price is Chairman. relevant materials to Directors in a timely manner to facilitate Directors’ participation in the Board (f) Identification and Management of Risk discussions on a fully‑informed basis. The Board’s collective experience will enable accurate identification of the principal risks that may affect the (a) Composition of the Board Company’s business. Key operational risks and their management will be recurring items for deliberation at Subject to the appointment requirements in the Articles Board meetings. of Association of the Company, the Company is committed to the following principles: (g) Ethical Standards • the Board is to comprise Directors with a blend of skills, experience and attributes appropriate for the The Board is committed to the establishment and Company and its business; and maintenance of appropriate ethical standards. • the principal criterion for the appointment of (h) ASX Corporate Governance new Directors is their ability to add value to the Recommendations Company and its business. The Corporate Governance Principles and No formal nomination committee or procedures have Recommendations of ASX (ASX Recommendations) been adopted for the identification, appointment and set out corporate governance guidelines for ASX listed review of the Board membership, but an informal
For personal use only use personal For companies. The Board has not formally adopted the ASX assessment process, facilitated by the Chairman in Recommendations on the basis that they do not consider consultation with the Company’s professional advisors, that they are all appropriate for the Company given its size has been committed to by the Board. and operations as a mineral exploration company.
(b) Independent Professional Advice Consistently with the ASX Recommendations, the Company will in its annual reports detail its corporate governance Subject to the Chairman’s approval (which is not to be policies and identify any recommendations which have not unreasonably withheld), the Directors, at the Company’s been followed and the reasons for not doing so. expense, may obtain independent professional advice on issues arising in the course of their duties.
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SUMATRA COPPER & GOLD plc PROSPECTUS 43 Abridged Legal Report
8.1 Background, Exploration and projects in Indonesia and for the establishment of Mining Legislation the appropriate Mining Investment Vehicles to hold the relevant mining licenses. (See Part II Section 1 of Soemadipradja & Taher (S&T) have been requested by the Full Legal Report for further information on the Sumatra Copper & Gold plc (the Company) to prepare Co‑operation Agreement and its addendum). a comprehensive legal report on the Company’s direct The Co‑operation Agreement contemplates, among and contractual relationships with respect to certain other matters, that the Company will hold up to a mining interests in Indonesia from the perspective of 92.5% interest in each Mining Investment Vehicle, and Indonesian law only, which was completed and lodged either NPM, Dwinad or any Future Mining Company, with ASIC on 25 August 2009 (Full Legal Report). as the case may be, will hold a 7.5% interest. The New In preparing the Full Legal Report, S&T relied in part Company Law states that the foreign holders of an on documents and information given to them by the interest in an Indonesian mining company that holds a Company and the Indonesian Partners in relation to mining licence issued under the New Mining Law will their activities in Indonesia. S&T wish to draw your be required to divest an as yet unspecified percentage attention to the limitations in obtaining reliable of their interest 5 years after commencement of information on companies and mining authorizations commercial production. in Indonesia due to the lack of up‑to‑date and accurate There have been recent indications from the Director registers, which are generally not available to the General of Minerals, Coal and Geothermal (Director public. Please see Part 1 of the Full Legal Report for General) in the media to the effect that foreign more details on the documents and information shareholders in any PMA mining company under received and reviewed by S&T, as well as the the New Mining Law must eventually divest part of assumptions and qualifications made in the preparation their interest in favour of Indonesian parties, so that of the Full Legal Report, which are all deemed to be the foreign interests will be no greater than 80%. incorporated into this Abridged Legal Report. The obligation is indicated to arise 5 years after the S&T were then requested by the Company to commencement of commercial production and to be prepare an abridged version of the Full Legal Report spread over the period of 4 years (at 5% per year for for inclusion in this Section 8 of the Prospectus a 100% foreign‑owned company). However, since
SECTION EIGHT (Abridged Legal Report). Unless otherwise stated, the implementing regulations to the new mining capitalised terms used in this Abridged Legal Report law regime have not yet been issued, this potential have the same meanings as the capitalised terms in divestment regime may change. our Full Legal Report. In addition, references to Parts, Between them, the Company, NPM and Dwinad hold Appendices and sections in this Abridged Legal Report (or held) various authorisations to conduct mining refer to the relevant Parts, Appendices and sections in activities (at this stage covering general survey and the Full Legal Report, which is set out in full on ASIC’s exploration only) in the projects referred to in the web‑site. This Abridged Legal Report must be read Table of Projects below (Projects). The authorisations together with the Full Legal Report and must not be underlying the Projects were granted and/or applied read in isolation. In reading this Abridged Legal Report, for under the former law that regulated mining the reader is deemed to have read the full text of the in Indonesia, with one exception being the NPM Full Legal Report. Pasaman Exploration IUP (referred to in the Table of In 2007 the Company entered into a Co‑operation Projects below). Agreement (which has been subsequently amended) As mentioned above, a new legal regime governing all with Mr Adi Adriansyah Sjoekri (Adi Sjoekri), an aspects of exploration and mining in Indonesia, including Indonesian national, PT Nusa Palapa Minerals (NPM), licensing, came into effect on 12 January 2009 (New an Indonesian mining company majority‑owned by Mining Law). The New Mining Law has replaced Law Adi Sjoekri and PT Dwinad Nusa Sejahtera (Dwinad),
For personal use only use personal For No. 11 of 1967 on the Basic Provisions on Mining (Old also an Indonesian mining company majority‑owned Mining Law). As at the effective date of the Full Legal by Adi Sjoekri, the purpose of which is, among other Report on 7 August 2009, the Indonesian Government things, to set out the terms and conditions of their has not yet published implementing regulations on how cooperation with each other in the identification to change from the authorisation/licensing system under and development of suitable exploration and mining the Old Mining Law to the authorisation/licensing system
44 SUMATRA COPPER & GOLD plc PROSPECTUS Abridged Legal Report Cont.
under the New Mining Law regime (Implementing The Company has a contractual right, through the Regulations). Further details on the old mining law Co‑operation Agreement, in the economic interest regime and the New Mining Law regime are described in derived from the general survey or exploration KP Appendix II of the Full Legal Report. licence held by its Indonesian Partners (NPM and Dwinad, as the case may be). One basic principle under the New Mining Law regime is that all new mining licences for metallic minerals are (b) SIPP (Surat Izin Penyelidikan Pendahuluan, which to be awarded through an auction process (the details is a preliminary survey licence granted under the of which are not yet known). However, the New Mining Old Mining Law after an In‑principle approval for a Law and the recently issued official circulars refer to Contract of Work (CoW) has been issued) certain already issued authorisations and applications to conduct mining activities under a Contract of Work The Company and its relevant Indonesian Partner that will be “grandfathered” under Article 172 of the (NPM) appear to hold rights under Article 172 of the New Mining Law in the process of converting into New Mining Law to be issued an IUP licence based on mining licences under the New Mining Law regime a joint CoW application and grant of the SIPP. without having to go through the auction process. (c) Preliminary CoW Documents (where a CoW Although the mining regulatory system is currently or kontrak karya is a contract of work between in a state of flux, the grandfathering provisions the Government of Indonesia and a contractor referred to above give reasonable comfort that various in Indonesia entered into under the Old Mining authorisations constituting the Projects will be able to Law, under which the contractor has been granted move from the old to the new licensing regime, subject contractual mining rights) to the current holders of the relevant authorisations The Company and its relevant Indonesian Partner complying with all the requirements of the (as yet) (NPM) appear to hold rights under Article 172 of unissued Implementing Regulations. This has been the New Mining Law to be issued an IUP licence demonstrated by the Regent of Pasaman having based on a prior joint CoW application and the already issued an IUP exploration license to NPM in the issuance of an in‑principle approval. process of upgrading NPM’s general survey KP. (Please see Part III of the Full Legal Report for our observations (d) IUP (Izin Usaha Pertambangan, which is a mining
and opinions on the various authorisations/rights/ business permit granted under the New Mining Law) SECTION EIGHT licenses relating to the Projects.) The Company has a contractual right, through its Specific details of the Projects and the Company’s Co‑operation Agreement, in the economic interest interest in each of the Projects are summarised in the derived from the IUP exploration licence held by its Table of Projects below. Indonesian Partner (NPM).
Table of Projects
In the following Table of Projects, the Company’s interest in the “Authorisation/rights held” is as set out below:
(a) KP (Kuasa Pertambangan, which is a mining authorisation granted under the Old Mining Law to Indonesian nationals and/or Indonesian legal entities managed and wholly owned by
Indonesian nationals) For personal use only use personal For
SUMATRA COPPER & GOLD plc PROSPECTUS 45 Abridged Legal Report Cont. Forestry Approval Status Approval Forestry granted by approvals Forestry the Director General of Forestry Planning ( DFP ), on behalf of to NPM the Minister of Forestry on 4 March 2009, valid for two years and extendable. Forestry approvals granted by granted by approvals Forestry DFP to Dwinad on 17 February 2009, valid for two years and extendable. Forestry approval not yet obtained. NPM applied to DFP for forestry on 12 May 2008, approval when the authorization was still in the form of a general survey date, forestry To approval KP. has not yet been obtained. SECTION EIGHT Status than 12 January 2010. than 12 January 2010. A letter was issued by the Director General to the Chairman of ( BKPM ) Board datedthe Investment Coordinating 6 July 2009 to support the application by the Company and NPM to establish a PMA company with the percentage interests of 92.5% and 7.5% respectively, recognizing that Musi Rawas Preliminary CoW under Article 172 of New Documents qualify for statutory protection Mining Law. In response to the on letter, 6 August 2009 BKPM issued its approval for the formation of a PMA mining company by the Company and of 92.5% and 7.5% respectively. interests NPM with the percentage IUP to Upgrade the Status of the General Survey KP”, expiring on 24 IUP to Upgrade the Status of General Survey KP”, expiring on 24 2015. This is an IUP exploration permit. March Area (Ha) 5,000 later no by licence IUP to conversion to subject 2011, May 29 to Valid 75,000 24,850 of an On 15 May 2009 the Regent of Pasaman granted an “Approval Name(s) of Holders NPM Dwinad 4,979 later no by licence IUP to conversion to subject 2011, May 29 to Valid
The Company and NPM NPM For personal use only use personal For Rights Held Exploration KP (referred to as the “NPM Musi Rawas Exploration KP”) Exploration KP (referred to as the “Dwinad Musi Rawas Exploration KP”) Preliminary CoW CoW Preliminary documents (referred to as the “Musi Rawas CoW Preliminary Documents”) Exploration IUP (referred to as the “NPM Pasaman Exploration IUP”) Project Authorisation / TEMBANG SONTANG
46 SUMATRA COPPER & GOLD plc PROSPECTUS Abridged Legal Report Cont. Forestry Approval Status Approval Forestry By letter dated 13 February 2009 DFP granted NPM a permit survey to carry out preliminary within a protection forest zone, covering an area of ± 45,562.5 Ha in Lebong, Rejang Lebong and Bengkulu Utara Regencies. The permit is valid for 2 years. On 13 May 2008, an application was submitted by NPM for permit. forestry a relevant of the The recommendation Governor of Jambi Province was then given to NPM (the Company) on 17 September not yet obtained. 2008. Approval Forestry approval not yet obtained. Forestry approval not yet obtained. SECTION EIGHT Status The Governor(lasting 6 months gave a temporary recommendation the the date of expiry Final Bengkulu SIPP) approving from Bengkulu Final the convert to Company) (the NPM by made application present overlapping areas are There SIPP/CoW application into an IUP. with competing parties who have within the Final Bengkulu SIPP area been issued KP permits. General to the Chairman of BKPM A letter was issued by the Director dated 6 July 2009, to support the application by the Company and of interests NPM to establish a PMA company with the percentage 92.5% and 7.5% respectively. In response to the on letter, 6 August 2009 BKPM issued approval letters for the establishment of 2 PMA mining companies by the Company and NPM with the percentage interests of 92.5% and 7.5% respectively, one in the Regency of Bengkulu Utara and the other in the Regencies of Rejan Lebong and Lebong. General to the Chairman of BKPM A letter was issued by the Director dated 6 July 2009 to support the application by Company and of interests NPM to establish a PMA company with the percentage on 6 August to the letter, In response 92.5% and 7.5% respectively. for the establishment of a PMA mining 2009 BKPM issued its approval of interests company by the Company and NPM with percentage 92.5% and 7.5% respectively. which is valid for subject 1 year, to conversion to IUP licence by no later than 12 January 2010 which is valid for subject 1 year, to conversion to IUP licence by no later than 12 January 2010 Area (Ha) 249,989 on 22 April 2009. Expired 235,800 on 10 February 2009. Expired 4,997 of the Regent Mandailing Natal dated 13 November 2008 Decree Name(s) of Holders The Company and NPM The Company and NPM NPM
Dwinad 4,719 of the Regent Mandailing Natal dated 13 November 2008 Decree For personal use only use personal For Rights Held SIPP (referred to as the “Final Bengkulu SIPP) SIPP (referred to as the “Jambi SIPP”) General Survey KP (referred to as the “NPM Madina General Survey KP”) General Survey KP (referred to as the “Dwinad Madina General Survey KP”) Project Authorisation / TANDAI TANDAI AND LEBONG OTHERS
SUMATRA COPPER & GOLD plc PROSPECTUS 47 Abridged Legal Report Cont.
During the transition period brought about by the Mining Law by both foreign and local investors in New Mining Law regime, until the Implementing the form of IUP and special mining business permits Regulations have been issued, it is currently anticipated (Izin Usaha Pertambangan Khusus, IUPK). that even if an authorisation expired after the effective date of the New Mining Law, that the holders of such The KPs, SIPPS, IUPs and the rights constituting the authorisations will not be required to give up the Authorisations contain various terms and conditions relevant authorisation area for auction. that must be satisfied by the holder. Any failure to comply with the obligations and duties set out in the The above matters would indicate that the areas over relevant KPs, SIPPs or IUPs could ultimately result in which such expired authorisations had been granted their revocation or potentially hinder the conversion currently appear to have some degree of protection process from the old to the new statutory mining against potential new applications to relevant mining regime under the New Mining Law and Implementing licence issuing authorities made by third parties over Regulations (that are yet to be issued). the same areas, provided that the holder of the expired authorisation has complied with the provisions of the The Forestry Law and regulations (see Appendix III New Mining Law and the current directives. Section 3 of the Full Legal Report) contain various provisions binding on any mining company that wishes Based on our due diligence inquiries, the holders of to conduct any activities (including survey and/or the authorisations constituting the Projects appear to exploration) in forestry areas. One such requirement is have done all that they are reasonably able to do in that the mining company must obtain and maintain a the absence of specific regulations, in order to comply forestry permit before conducting any such activities. with the New Mining Law and current directives. In the Such permits contain various obligations and duties correspondence S&T reviewed between the holders of that must be complied with. Failure to obtain or comply such authorisations and the relevant issuing authorities, with all the terms and conditions of such a permit could S&T have not detected any indication that the issuing result in civil and criminal liability under the Forestry Law authorities will not process such authorisations. and could lead to the cancellation of the relevant mining In general, the written responses from the mining authority. Accordingly in the Table of Projects above, licence issuing authorities point to the fact that the S&T refer to the status of the forestry permits in relation relevant Implementing Regulations have not yet been to each Authorisation where activities have commenced.
SECTION EIGHT issued, so the conversion process must wait until then. In addition, the relevant environmental regulations The New Mining Law regime and the current directives specify that an AMDAL (environmental impact indicate (among other matters) that foreign parties study) is required prior to exploration activities being (such as the Company) will be able to obtain a direct commenced over an area that covers at least 200 Ha, interest in Indonesian subsidiaries that will be able to or having an area open for a mine which is at least hold mining licences under the new licensing system, 50 Ha (cumulative per annum), and must be prepared subject to the anticipated principle of one company during the feasibility study stage. being able to hold only one mining licence (unless it is a public listed company) with a maximum area of During the survey and exploration stages, the relevant 100,000 Hectares (Ha). mining company must prepare and file Environmental Management Effort (UKL) and Environmental Control Although, the Implementing Regulations have not yet Effort (UPL) studies. While there are no specific been issued, on 30 January 2009 and 24 March 2009, penalties imposed on a mining company for the failure the Director General issued certain directives to file UKL/UPL studies, the relevant mining company (D‑G Circulars) to establish a preliminary framework for and its officers could face criminal and civil/tort claims the transition from current mining permits and mining in respect of any subsequent environmental damage to permit applications to new mining business permits (IUP). the area in which mining activities were conducted.
One of the main objectives of the New Mining Law Based on our due diligence inquiries, neither NPM nor For personal use only use personal For and the D‑G Circulars is to phase out the usage of the Dwinad has prepared any UKL/UPL studies for general current (old) forms of mining permit (that is, in the survey activities carried out for each of the Projects, forms of: (i) Mining Authorisation/Kuasa Pertambangan but they are currently in discussions with the relevant or KP, (ii) Contract of Work/Kontrak Karya or CoW) authorities regarding preparation of UKL/UPL studies in or Preliminary survey licence/Surat Izin Penyelidikan relation to the feasibility studies for the Projects. Pendahuluan or SIPP), which can no longer be issued and will eventually become invalid, so that investment S&T are aware of certain companies currently operating in the mining sector can be made under the New in Indonesia that interpret the requirement to submit UKL/UPL studies as applying only in circumstances
48 SUMATRA COPPER & GOLD plc PROSPECTUS Abridged Legal Report Cont.
where general survey activities would create a significant Rawas Preliminary CoW Documents referred to below). impact on the environment, but this interpretation is not supported by the relevant regulations. Please see Appendix Details of the two KPs and the Preliminary CoW III, Section 1(c)(2) of the Full Legal Report for further details Documents are set out below. of the UKL/UPL requirements. (1) Exploration KP pursuant to Decree of the Regent of Musi Rawas No.08/KPTS/DISTAMBEN/2008 of 8.2 Authorisations/rights/licenses 2008 dated 29 May 2008, regarding the Granting constituting the Projects of an Exploration Mining Authorisation for gold and related minerals to NPM, which is valid for IMPORTANT NOTE: The maps below were prepared 3 years, over certain areas within the Musi Rawas solely by the Company and S&T did not have any role Regency, (total area 5,000 Ha) (NPM Musi Rawas in the preparation or verification of the maps/figures Exploration KP); below or the identified locations of the Project authorization/rights/licence areas. (2) Exploration KP pursuant to Decree of the Regent of Musi Rawas No.09/KPTS/DISTAMBEN/2008 of (a) Tembang Project 2008 dated 29 May 2008, regarding the Granting of an Exploration Mining Authorisation for gold This project consists of two KPs and a CoW Application and related minerals to Dwinad, which is valid for (forming part of the Preliminary CoW Documents) 3 years, over certain areas within the Musi Rawas (see the Table of Projects above and Fig. 1 below). Regency, (total area 4,979 Ha) (Dwinad Musi S&T has been informed by the Company and NPM Rawas Exploration KP); that the processing of the CoW Application evolved over an extended period of time because the Company (the Musi Rawas Exploration KP and the Dwinad Musi and NPM were requested to modify the application Rawas Exploration KP are referred to as the Musi boundary (which is reflected in the chain of Musi Rawas KPs).
SECTION EIGHT For personal use only use personal For
Figure 1: Tembang Project location
SUMATRA COPPER & GOLD plc PROSPECTUS 49 Abridged Legal Report Cont.
NPM and Dwinad each hold current forestry permits Subsequently, an In‑principle Approval was granted issued by the Director General of Forestry Planning on 8 August 2008 through Decree of Bupati (DFP) on behalf of the Minister of Forestry in order to Musi Rawas No.540/015/DPE/2008, which is valid carry out general survey or exploration activities within for 12 months (NPM In‑principle Approval). the production forest area contained within their The NPM In‑principle Approval does not refer to the relevant Musi Rawas KP areas. The forestry permits Company and also doesn’t refer to either the Initial indicate that almost all of the relevant KP areas are Application or the Second Application. located in production forest. The permits are valid for 2 years and extendable. (S&T refer to the Initial Application, the Second Application the NPM Area Reservation Approval, We are not aware of any evidence that NPM or Dwinad the NPM In‑principle Application and the NPM has breached any material term or condition of the In‑principle Approval collectively as the Musi Musi Rawas Exploration KPs and therefore S&T are not Rawas Preliminary CoW Documents). aware of any grounds that could be used as a basis for their revocation or suspension or for any warning The various discrepancies in the Musi Rawas Preliminary letters to be issued by the relevant local regulatory CoW Documents referred to above could be raised by authorities to NPM or Dwinad, as the case may be. the regulatory authorities to challenge any claim of the To our knowledge and solely based on our interviews Company and NPM that they have the protection given with Adi Sjoekri and Alan Flint, none of the Musi under Article 172 of the Mining Law against having Rawas Exploration KPs has been assigned for security to go through the auction process. However, the purposes to any third party. materiality of the risk of such a challenge is somewhat mitigated by the letter from the Director General to Although the mining regulatory system is currently in a BKPM dated 6 July 2009 (referred to in points (1) and state of flux, the grandfathering provisions contained (2) immediately below) in which the Director General in the New Mining Law and the D‑G Circulars give requests BKPM to approve the establishment of an reasonable comfort that the Musi Rawas KPs will be Indonesian mining company by NPM and the Company, able to move from the old to the new licensing regime, in apparent recognition of their rights under Article subject to the current holders of the Musi Rawas KPs 172 of the Mining Law. complying with all the requirements of the (as yet) The Company and NPM have firmly expressed to S&T
SECTION EIGHT unissued regulations. their position that despite various discrepancies in the (3) An application to reserve an area in Musi Rawas was Musi Rawas Preliminary CoW Documents, they are originally made on 26 May 2006 under the name of confident that the relevant local authorities already Dwinad (Initial Application). On 27 September 2006, recognize the relevant CoW application that can be NPM submitted a new application to the Regent of used as a basis to obtain an IUP without the area Musi Rawas for a CoW, a SIPP and reservation area having to go to auction. This position appears to be (Second Application), together with a notification supported by the following facts: letter to the Governor of South Sumatra setting out the change of one of the applicants from Dwinad to (1) the Director General issued a letter on 6 July 2009 NPM. The Second Application refers to the Company addressed to BKPM which S&T consider to as a co‑applicant. recommend the establishment of an Indonesian company in relation to the Musi Rawas Preliminary On 23 May 2007 a reservation area approval was CoW Documents; granted by the Regent of Musi Rawas to NPM (only) for an area, which S&T have been informed by (2) the letter from the Director General appeared to NPM, is within the area applied for in the Second recognize that the Musi Rawas Preliminary CoW Application (NPM Area Reservation Approval). Documents qualify for statutory protection under The application for the NPM Area Reservation Article 172 of the New Mining Law; and
For personal use only use personal For Approval dated 16 May 2008 was made by NPM, (3) in response to the above letter, on 6 August 2009 but refers to the Company as co‑applicant. BKPM gave its approval to the establishment of NPM (only) then submitted an application for an a PMA mining company in Musi Rawas by the In‑principal approval over an area in Musi Rawas by Company and NPM with interests of 92.5% and letter ref. Npm/2008.06/171 dated 17 June 2008 7.5% respectively. (NPM In‑principle Application). The NPM In‑principle Application does not refer to the Company as a co‑applicant.
50 SUMATRA COPPER & GOLD plc PROSPECTUS Abridged Legal Report Cont.
(b) Sontang Project on the Approval of an IUP to NPM to Upgrade the Status of the General Survey KP for Gold and The Figure below indicates the location of the NPM its Derivatives KW 06026NPM (NPM Pasaman Pasaman Exploration IUP, which was only recently Exploration IUP). The NPM Pasaman Exploration granted on 15 May 2009, even before the issuance of IUP is granted for a period of 6 years, expiring on the Implementing Regulations. 24 March 2015.
The Regent of Pasaman Regency originally granted The format of the NPM Pasaman Exploration IUP a KP to NPM pursuant to Decree No.188.45/1178/ appears to follow the format for an exploration IUP BUP‑PAS/2006 dated 28 December 2006 regarding the set out in Circular Letter of the Directorate General of Granting of a General Survey Mining Authorisation for Mineral, Coal and Geothermal No.1053/30/DJB/2009, gold and related minerals, over certain areas within dated 24 March 2009, on Mining Business Permits the Pasaman Regency (total area 24,850 Ha). The (IUP), (D‑G Circular 1053). Although it is anticipated KP was then extended by Decree of the Regent of that the Implementing Regulations would not Pasaman Regency No.188.45/211/BUP‑PAS/2008 dated contradict the D‑G Circular 1053, this matter cannot 24 March 2008, which was valid for one year (NPM yet be confirmed and if the Implementing Regulations Pasaman General Survey KP). On 30 January 2009 differ from D‑G Circular 1053, this matter could (prior to the expiry of the NPM Pasaman General Survey potentially impact the NPM Pasaman Exploration IUP. KP), NPM made an application to upgrade the NPM Pasaman General Survey KP into an Exploration KP. On 12 May 2008, when the authorisation was still in the form of the NPM Pasaman General Survey KP, NPM Notwithstanding the lack of Implementing Regulations applied to the Director General of Forestry Planning on the coordination procedures between the regional (DFP), on behalf of the Minister of Forestry, for a government and the central government on the forestry permit to conduct exploration activities in issuance of IUP, the Bupati of Pasaman issued Decree forest areas. However, to date such permit has not yet No.188.45/494/BUP‑PAS/2009, dated 15 May 2009, been issued.
SECTION EIGHT For personal use only use personal For
Figure 2: Sontang Project location
SUMATRA COPPER & GOLD plc PROSPECTUS 51 Abridged Legal Report Cont.
(c) Tandai Project and Lebong Project Governor of Bengkulu (Application for Bengkulu In‑principle Approval) (following which Dwinad was These two projects are located within an area of replaced by NPM as the co‑applicant with the Company) 249,989 Ha following a CoW application made jointly (Initial Bengkulu SIPP). by the Company and NPM and the subsequent grant of an In‑principle approval, followed by the grant of a SIPP The Initial Bengkulu SIPP was subsequently extended to enable the Company and NPM to conduct preliminary through Letter of Governor of Bengkulu Province survey activities within that area. The joint applicants No: 534/117/ESDM dated 22 April 2008, over the plan to apply for two exploration IUP licences covering a areas within Rejang Lebong Regency, Lebong Regency, total of 200,000 Ha within the total area and they have North Bengkulu Regency and Mukomuko Regency, all in already commenced submission of such applications. Bengkulu Province (total area 249,988.85 Ha), valid for The efforts by the Company and NPM to apply for 12 months from 22 April 2008 (Final Bengkulu SIPP), the exploration IUP licences are described below and expiring on 22 April 2009. are further elaborated in Part III, Section 2 under the heading “Lebong Project and Tandai Project”. On 20 April 2009, the Governor of Bengkulu also responded to a request letter from NPM (the Company) The Company and NPM held a SIPP in Bengkulu Province dated 17 March 2009. In his response, the Governor in relation to gold and related minerals, which was of Bengkulu advised that the Governor has given originally granted to them by the Governor of Bengkulu a temporary recommendation (lasting 6 months Province on 29 September 2006 for one year following from the date of expiry of the Final Bengkulu SIPP) the issuance of an In‑principle Approval on 11 July 2006 approving the application made by NPM (the Company) by the Dinas Energi dan Sumber Daya Mineral Propinsi to convert the Final Bengkulu SIPP/CoW application Bengkulu (the Office of Energy and Mineral Resources into an IUP (Governor’s Recommendation Letter). of the Provincial Government of Bengkulu) (Bengkulu The Governor’s Recommendation Letter also notes that In‑principle Approval). The Bengkulu In‑principle the Implementing Regulations have not yet been issued Approval was granted in response to a joint application and that the Governor’s Recommendation Letter is only for an In‑principle Approval originally made on valid as long as it does not contravene the prevailing 31 May 2006 by the Company and Dwinad to the laws and regulations.
SECTION EIGHT For personal use only use personal For
Figure 3: Tandai Project and Lebong Project location
52 SUMATRA COPPER & GOLD plc PROSPECTUS Abridged Legal Report Cont.
In response to an application dated 17 March 2009 by Bengkulu SIPP was issued in compliance with the NPM (the Company) to the Bengkulu Province Energy relevant law and regulations. and Mineral Resources Office (Bengkulu EMr Office) for conversion of the Final Bengkulu SIPP to become There is a dispute relating to an area of approximately an exploration IUP, and to convert their SIPP area into 12,370 Ha (First Disputed Area), within the initial 2 IUPs, the Bengkulu EMr Office responded on 15 April to Bengkulu SIPP granted to the Company and NPM, the effect that: (a) NPM (the Company) must identify where two overlapping exploration KPs were granted by two areas with a maximum of 200,000 Ha for 2 IUPs; the Lebong Regent to related third parties: one to PT Tansri and (b) since the Final Bengkulu SIPP has been granted Madjid Energi, and the other to PT Lion Power Energy to NPM (the Company), the area covered in the CoW (collectively referred to as Competing KP Holders). application will become an IUP area(s) without having to This dispute has not yet been conclusively resolved. go through the auction mechanism in the issuance of IUP, S&T have reviewed documents indicating that when as provided in Article 172 of the New Mining Law. NPM and the Company applied for an extension of On 6 July 2009, the Director General issued a letter to the the Initial Bengkulu SIPP (that was originally granted Chairman of BKPM which S&T consider to recommend on 29 September 2006) the Governor of Bengkulu set the establishment of an “Indonesian Legal Entity”. up an evaluation team to verify the competing claims of NPM/the Company and the Competing KP Holders. The responses given by the regulatory authorities referred The evaluation team recommended in its conclusions to above do not indicate that there are any obstacles to that the KPs issued to the Competing KP Holders the conversion process from the Final Bengkulu SIPP into should be revoked and that an extension of the Initial an IUP licence or licences. Further, there are indications Bengkulu SIPP should be issued. As a result, the Final from the correspondence that the IUP issuing authorities Bengkulu SIPP was issued on 22 April 2008. are contemplating the issuance of more than one IUP to the Company and NPM, although there are currently no With the subsequent grant by the Lebong Regent of an regulations on this matter. exploitation KP to PT Tansri Madjid Energi by Decision Letter No.331 of 2008 on “Granting of the Exploitation In response to the Director General’s letter dated Authority and Authority to Transport and Sell Gold 6 July referred to above, on 6 August 2009 BKPM gave Minerals” on 30 April 2008 (the Tansri Exploitation KP), its approval for the Company and NPM to establish the Company identified an area of some 1,649 Ha of land 2 PMA mining companies with the percentage interests in Lebong Donok and Tambang Sawah that overlapped of 92.5% and 7.5% respectively, one in the Regency of with the designated area for the Company and NPM SECTION EIGHT Bengkulu Utara and the other in the Regencies of Rejan under the Final Bengkulu SIPP (Further Overlapping Lebong and Lebong. Area). The Company and NPM have informed S&T that the significance of the Further Overlapping Area is that According to a letter dated 13 February 2009 from the it overlaps the Lebong Donok and Tambang Sawah Director General of Forestry Planning, NPM has been prospects, whereas the First Disputed Area did not. granted a permit to carry out preliminary survey of gold and related minerals located within a protection NPM and the Company briefed Soemadipradja & Taher forest zone, covering an area of ± 45,562.5 Ha in to commence litigation in the State Administrative Lebong, Rejang Lebong and Bengkulu Utara Regencies. Court of Bengkulu, Indonesia against the Lebong The permit is valid for 2 years. Regent (as Defendant). PT Tansri Madjid Energi took action to be joined to the proceedings as Defendant II (d) Disputed Areas in Intervention. The case commenced on 28 July 2008 and on 22 September 2008 the State Administrative In the area of the Lebong Project within the Final Court of Bengkulu issued an interlocutory order to Bengkulu SIPP area there are: (a) a First Disputed suspend the Tansri Exploitation KP. After a number of Area, brought about due to 2 overlapping KP areas hearings, the Administrative Court of Bengkulu handed granted to third parties; (b) a Further Overlapping down a Decision on 28 January 2009, in favour of NPM Area, which results from certain actions taken by the and ordered the Lebong Regent to withdraw the Tansri local Regent (Bupati); and (c) a Second Disputed Area, For personal use only use personal For Exploitation KP (Administrative Court Decision). in respect of which the dispute is inactive, involving another overlapping KP area with a third party. The Defendants then appealed the Administrative (All disputed areas referred to in Fig.4 below). Court Decision to the High Administrative Court of Medan. The decision of the High Administrative Please see additional details of the disputes in Court of Medan was made on 15 May 2009 and Part III Section 2(i) entitled “Lebong Project and Tandai was formally served on NPM on 22 June 2009 Project ‑ Disputed Areas” in the Full Legal Report. (High Administrative Court Decision). The result of the High Administrative Court Decision was to overturn S&T have advised the Company and NPM that based the Administrative Court Decision. on their review of the relevant documents, the Final
SUMATRA COPPER & GOLD plc PROSPECTUS 53 Abridged Legal Report Cont.
Soemadipradja & Taher was subsequently instructed Accordingly the validity of the Latest Bengkulu SIPP by NPM to submit a notice of appeal (cassation) is not the subject of the current litigation. to the Supreme Court in order to appeal the High Administrative Court Decision, which was done on Notwithstanding the current litigation, the Company 2 July 2009, within the statutory period for cassation and NPM have commenced the process of applying for to be made to the Supreme Court. On 13 July 2009, IUPs over the Latest Bengkulu SIPP area. The Company Soemadipradja & Taher then submitted a Memorandum and NPM have informed S&T that the Lebong project of Cassation (Memori Kasasi) to the Supreme Court on area is within the IUPs applied for by them. behalf of NPM and the Company. Accordingly, the High There is currently an inactive dispute relating to an area Administrative Court Decision is not final and binding of approximately 398.6 Ha (Second Disputed Area) on the parties. in Tambang Sawah in respect of which a third party, In relation to the litigation currently in the Supreme PT Kresna Tambang Sawah (Kresna), claims that it was Court referred to above, Soemadipradja & Taher make granted a gold exploitation KP on 3 November 2000 the following observations: (Kresna Exploitation KP), which Kresna maintains is still valid. A letter of demand was issued by Kresna’s (i) The outcome of the litigation should not have any legal counsel to NPM on 19 February 2008. According negative impact on the ability of NPM and the to the Company and its Indonesian Partners, there has Company, in their joint capacity as holders of an been no contact from Kresna in relation to this dispute initial CoW application and the Final Bengkulu SIPP, for over a year, leading to the assumption that this to apply for an IUP licence or IUP licences within matter is inactive. the Final Bengkulu SIPP Area, excluding the First Disputed Area; and On the basis of our inquiries, we consider that Kresna may have failed to satisfy its obligation to carry out (ii) The current litigation was commenced by NPM on activities in the KP area within the specified period and the basis of its claim that the Tansri Exploitation to make the requisite filings. If this is correct, then such KP was improperly and invalidly issued and should failures could constitute sufficient basis for the Kresna therefore be withdrawn by the Lebong Regent. Exploitation KP to be revoked.
SECTION EIGHT For personal use only use personal For
Figure 4: First Disputed Area, Further Overlapping Area and Second Disputed Area
54 SUMATRA COPPER & GOLD plc PROSPECTUS Abridged Legal Report Cont.
(e) Other Projects The Jambi SIPP expired on 10 February 2009 and has not yet been extended. However the Company and The Other Projects consist of one CoW Application NPM filed an application on 9 December 2008 to jointly filed by NPM and the Company, pursuant to extend the Jambi SIPP, and on 9 February 2009 received which a SIPP was granted in the province of Jambi and a response from the Mines & Energy Office of Jambi two KPs, one granted to each of NPM and Dwinad in Province (Jambi Province EMR) stating that the Jambi respect of areas in North Sumatra. The Company, NPM SIPP extension application is being processed whilst and Dwinad have informed S&T that exploration has awaiting further regulations from the Government. not yet commenced within the areas represented by these authorizations. On 6 July 2009, the Director General issued a letter to the Chairman of BKPM which S&T consider to NPM and the Company filed a CoW application with recommend the establishment of the Indonesian legal the Governor of Jambi Province on 28 September 2006 entity to hold the IUP (D‑G Jambi Recommendation). (Jambi CoW Application). In response, the Governor The response given by the Jambi Province EMr referred of Jambi Province granted an In‑principle Approval to to above does not indicate that there are any obstacles NPM and the Company on 24 April 2007. According to the conversion process into an IUP or IUPs. Based on to a letter of the Governor of Jambi Province the D‑G Jambi Recommendation, it appears that NPM No:582/126/Dispertamben dated 10 February 2008, (the Company) may able to establish an Indonesian the Company and NPM were then granted a SIPP in legal entity (as required) to hold an IUP (to be Jambi Province in relation to gold and related minerals, processed from the Jambi SIPP). over certain areas within the Sarolangun and Merangin Regency, Jambi, (total area 235,800 Ha) for a period In response to the D‑G Jambi Recommendation, on of 12 months (Jambi SIPP). The passage of the new 6 August 2009 BKPM gave their approval for the law precludes the granting of a one‑year extension to establishment of a PMA mining company by the the SIPP, and accordingly, the Jambi SIPP expired on Company and its Indonesian Partner (NPM) with the 10 February 2009. percentage interests of 92.5% and 7.5% respectively.
SECTION EIGHT For personal use only use personal For
Figure 5: Other Projects: Jambi SIPP area
SUMATRA COPPER & GOLD plc PROSPECTUS 55 Abridged Legal Report Cont.
The following KPs have been granted by the Regent kehutanan), which require relevant permits from the of Mandailing Natal to NPM and Dwinad (the Madina Ministry of Forestry that have not yet been issued. General Survey KPs): S&T are not aware of any evidence that NPM or Dwinad (i) General Survey KP pursuant to Decree of the has breached any material term or condition of the Regent of Mandailing Natal No.543/655/K/2008 Madina General Survey KPs and therefore S&T are not dated 13 November 2008 regarding the Granting aware of any grounds that could be used as a basis for of a General Survey Mining Authorisation for gold their revocation or suspension or for any warning letters and related minerals to NPM, which is valid for to be issued by the relevant local regulatory authorities to 1 year, over certain areas within the Mandailing NPM or Dwinad, as the case may be. Natal Regency, (total area 4,997 Ha); and Although the mining regulatory system is currently (ii) General Survey KP pursuant to Decree of the in a state of flux, the grandfathering provisions give Regent of Mandailing Natal No.543/654/K/2008 reasonable comfort that the Jambi CoW Application/ dated 13 November 2008 regarding the Granting Jambi SIPP and the Madina General Survey KPs will of a General Survey Mining Authorisation for gold be able to move from the old to the new licensing and related minerals to Dwinad, which is valid for regime, subject to the current holders of the relevant 1 year, over certain areas within the Mandailing Authorisations complying with all the requirements Natal Regency, (total area 4,719 Ha). of the (as yet) unissued regulations. The limited grandfathering provisions contained in the New Mining S&T have been informed by NPM and Dwinad that no Law regime and the D‑G Circulars indicate that the general survey activities have been commenced in any of Jambi CoW Application/Jambi SIPP and the Madina the forestry areas contained within the Madina General General Survey KPs may be converted into IUPs without Survey KP areas and that such activities will not be the relevant areas having to go to auction, subject commenced until the appropriate forestry permits have to the current holders of the relevant permits and been obtained. Each Madina General Survey KP area is applications complying with the directives under the located within certain protected forest areas and certain D‑G Circulars and the (as yet unissued) regulations non‑forestry preservation areas (kawasan budi daya non contemplated under the New Mining Law.
SECTION EIGHT For personal use only use personal For
Figure 6: Other Projects: Madina General Survey KPs
56 SUMATRA COPPER & GOLD plc PROSPECTUS Financial Information
The Sumatra Copper & Gold plc consolidated balance sheet as at 30 April 2009 and pro forma balance sheets, showing the financial effects of the completion of the Offer and other transactions as detailed below, on the Sumatra consolidated balance sheet, are as follows:
9.1 Consolidated Unaudited Historic and Pro Forma Balance Sheets
Consolidated Pro Forma 1 Pro Forma 2 30 April 2009 (Minimum) (Target) $ $ $ CURRENT ASSETS Cash and cash equivalents 412,152 9,341,267 11,239,672 Prepayments and other receivables 320,122 320,122 320,122 TOTAL CURRENT ASSETS 732,274 9,661,389 11,559,794 NON‑CURRENT ASSETS Investments 181,807 181,807 181,807 Property, plant and equipment 206,430 206,430 206,430 Exploration and evaluation expenditure 12,865,839 12,865,839 12,865,839 TOTAL NON‑CURRENT ASSETS 13,254,076 13,254,076 13,254,076 TOTAL ASSETS 13,986,350 22,915,465 24,813,870 CURRENT LIABILITIES Trade and other payables 177,139 177,139 177,139 Accruals and other liabilities 4,088,369 4,088,369 4,088,369
TOTAL CURRENT LIABILITIES 4,265,508 4,265,508 4,265,508 SECTION NINE TOTAL LIABILITIES 4,265,508 4,265,508 4,265,508 NET ASSETS 9,720,842 18,649,957 20,548,362 EQUITY Issued capital and reserves 9,701,331 18,630,446 20,528,851 TOTAL PARENT EQUITY INTEREST 9,701,331 18,630,446 20,528,851 Minority interest 19,511 19,511 19,511 TOTAL EQUITY 9,720,842 18,649,957 20,548,362
Notes to the Pro Forma Balance Sheets The Group has obtained a short term cash drawdown facility from Macquarie Bank for up to US$250,000 Going concern on the basis of the grant of 5.95 warrants at $0.20 to Macquarie Bank per US$1 drawn by the Group. Sumatra Copper & Gold plc and its subsidiaries (the The Group must repay all amounts outstanding under “Group”) are currently involved in exploration and the Facility on the earlier of: evaluation of its gold/silver projects and are yet to commence mining operations. The Group is funded (a) 30 days after the Group receives any proceeds from
For personal use only use personal For through the issue of Shares and bank facilities. The the issue; and Group has a US$3 million bridge to equity debt facility with Macquarie Bank which was originally due for (b) 30 September 2009. repayment by 31 July 2009 but which has now been As at the date of the prospectus the short term cash extended to 30 September 2009. At 17 August 2009 drawdown facility was undrawn. the facility has been fully drawn down. The Group has total current liabilities of A$4.3million and net current liabilities of A$3.5 million as at 30 April 2009.
SUMATRA COPPER & GOLD plc PROSPECTUS 57 Financial Information Cont.
The ability of the Group to continue as a going concern Estimates and Judgments is dependent upon the successful outcome of the proposed capital raising of between A$10 million and In the process of applying the Group’s accounting A$12 million to coincide with a listing of the Company’s policies, management makes various judgments CDIs for Shares on the ASX by 30 September 2009 and estimations that can significantly affect the (the “Proposed Offer”). The Directors have a reasonable amounts recognised in the Pro Forma Balance Sheets. expectation that as a result of the cash proceeds from Estimates and judgments are evaluated using historical the Proposed Offer that during the twelve months knowledge and the best available current information. from July 2009 the Group will be able to: Estimates assume a reasonable expectation of future events and are based on current trends and economic • repay the Macquarie debt; data, obtained both externally and within the Group. The key estimates or judgments made in preparing the • pay costs associated with the offer of $1.1 million Pro Forma Balance sheets are: to $1.2 million; All exploration and evaluation expenditure • incur $0.5 million on administrative and other costs ($12.8 million at 30 April 2009) has been capitalised on in the next 12 months; and the basis that:
• incur $3.1 million on exploration in the next • the expenditures are expected to be recouped 12 months. through successful development and exploitation The pro forma balance sheets at 30 April 2009 have of the area of interest; or been prepared on the going concern basis. However • activities in the area of interest have not at the the circumstances above cast significant uncertainly on reporting date, reached a stage which permits a the Group’s ability to continue as a going concern and reasonable assessment of the existence or other therefore, that it may be unable to realise its assets and wise of economically recoverable reserves and discharge its liabilities in the normal course of business. active and significant operations in, or in relation to, the area of interest are continuing.
SECTION NINE Basis of Preparation of the Pro Forma Balance Sheets Pro Forma Balance Sheet Adjustments
The pro forma balance sheets as at 30 April 2009 The Pro Forma Balance Sheets have been adjusted to (the “Pro Forma Balance Sheets”) have been derived reflect the Proposed Offer and associated costs under from the consolidated Special Purpose Financial the following two scenarios: Statements of the Group as at 30 April 2009 which were presented in Pounds Sterling. The Pro Forma (a) Pro Forma 1 ‑ Minimum subscription $10 million Balance Sheets have been converted into Australian dollars at the rate prevailing at 30 April 2009 The Pro Forma 1 balance sheet as at 30 April 2009 (2.06 Australian dollars to 1 Pound Sterling). has been prepared based on the unaudited balance sheet as at that date adjusted for the following The Pro Forma Balance Sheets have been prepared in transactions which are contemplated by this accordance with the recognition and measurement Proposed Offer: principles prescribed in Australian Accounting Standards (including the Australian Accounting • the issue of 50 million CDIs for Shares at Interpretations) as issued by the Australian Accounting 20 cents each thereby raising $10 million; Standards Board (“Australian Accounting Standards” or “AAS”) and the Corporations Act 2001. • the payment of expenses associated with the Proposed Offer amounting to $1,070,885, The Pro Forma Balance Sheets are prepared on the $1,038,875 of which is being charged against
historical cost basis. issued capital and $32,010 is being expensed; For personal use only use personal For
• the issue of 538,450 CDIs for shares to Directors in lieu of outstanding Director’s fees at 30 June 2009, equivalent to $107,690; and
• the issue of 1,500,000 CDIs for shares to parties promoting the offer, equivalent to $300,000.
58 SUMATRA COPPER & GOLD plc PROSPECTUS Financial Information Cont.
(b) Pro Forma 2 ‑ Target subscription $12 million 9.2 Funds Available and Application The Pro Forma 2 balance sheet as at 30 April 2009 of Funds has been prepared based on the unaudited balance Funds raised pursuant to this Prospectus, which may be sheet as at that date adjusted for the following supplemented by other potential revenue, are proposed transactions which are contemplated by this to be used as follows: Proposed Offer;
• the issue of 60 million CDIs for Shares at Year 1 Year 2 Total 20 cents each thereby raising $12 million, $’000 $’000 $’000 pursuant to the Prospectus; Sources of Funds
1 • the payment of expenses associated with the Funds on hand 412 3,657 412 Proposed Offer amounting to $1,172,480, Proceeds from the Offer2 12,000 ‑ 12,000 $1,138,875 of which is being charged against Interest 103 19 122 issued capital and $33,605 is being expensed; Total Sources of Funds 12,515 19 12,534 • the issue of 538,450 CDIs for shares to Applications of Funds Directors in lieu of outstanding Director’s fees at 30 June 2009, equivalent to $107,690; and Tembang Project 1,933 770 2,703 Lebong Project 162 670 832 • the issue of 1,500,000 CDIs for shares to parties promoting the offer, equivalent to $300,000. Tandai Project 125 68 193 Sontang Project 1,012 1,173 2,185 Summary of Significant Accounting Policies Corporate and Overheads Exploration and Evaluation Costs Corporate costs 501 376 877 Costs of the Offer 1,173 ‑ 1,173 Exploration and evaluation costs related to an area SECTION NINE of interest are written off as incurred except they Repay Macquarie Loan 3,868 ‑ 3,868 are carried forward as an asset in the balance sheet Capital costs 84 85 169 where the rights of tenure of an area are current and Total Applications it is believed that the costs will be recouped through of Funds 8,858 3,142 12,000 successful development and exploitation of the area of interest, or alternatively by its sale. Cash Balance on Hand 3,657 534 534 Notes: Capitalised costs include costs directly related to exploration and evaluation activities in the relevant 1 The funds on hand at the commencement of year 1 is area of interest. General and administrative costs are the Company’s 30 April 2009 cash balance. The Group allocated to an exploration or evaluation asset only to has continued exploration activity since 30 April 2009. At the extent that those costs can be related directly to 31 July 2009 the cash balance of the Group was $64,308. operational activities in the relevant area of interest. 2 Application of funds is based on the full subscription amount of $12 million being achieved. Capitalised exploration and evaluation costs are written off where the above conditions are no longer satisfied. The above statement of cash flows is based on best estimates and assumptions about future events. The Group performs impairment testing when facts These estimates and assumptions may not occur. and circumstances suggest that the carrying amount The continued funding of each project is dependent has been impaired. If it is determined that the asset upon successful exploration and development results
has been impaired it is immediately written off in the being achieved and the continued viability of each For personal use only use personal For income statement. project. The Directors reserve the right to utilise the Company’s funds in the manner they believe is most appropriate for the Company to achieve success. The actual utilisation of funds may differ from the projections contained in this Prospectus, and successful exploration results may lead to a need for additional funding requirements.
SUMATRA COPPER & GOLD plc PROSPECTUS 59 Risk Factors
10.1 Introduction The mining regulatory system is currently in a state of flux and there is no guarantee that the various An investment in the Company is not risk free and authorisations constituting the Projects will be prospective new investors should consider the risk converted into business mining agreements under the factors described below, together with information new Mining Law regime without having to through the contained elsewhere in this Prospectus, before deciding auction process. whether to apply for Securities. (c) Legal Dispute in Relation to an Area Within The following is not intended to be an exhaustive list of the Bengkulu Sipp Area the risk factors to which the Company is exposed. There is an ongoing claim commenced by NPM Risks Specific to the Company regarding an overlapping area within the Final Bengkulu SIPP area held by an exploitation KP holder 10.2 Authorisations (PT Tansri Madjid Energi) which covers the Lebong project. Although Sumatra and its Indonesian lawyers (a) General believe that the competing exploitation KP held by PT Tansri Madjid Energi was not validly issued, the Under the KPs, the IUPs and certain other contractual claim by NPM may take considerable time and cost to agreements to which the Company is or may in resolve and will be subject to the final the decision of the future become a party, the Company is or may the Indonesian Supreme Court. There is no guarantee become subject to payments and other obligations. that this will result in a satisfactory resolution for NPM. In particular, holders of mineral authorisations are required to meet the prescribed conditions on those If the Supreme Court proceedings are not decided in authorisations, including certain payment obligations. favour of NPM, then, depending on the contents of the Failure to meet these conditions could render the relevant judgment, NPM may be able to seek judicial
SECTION TEN licence liable to be revoked. review of the judgment. Although the judgment will only determine the narrow issue of whether the While the Company has diligently investigated the titles exploitation KP held by PT Tansri Madjid is valid, if the to the authorisations relating to the Projects and to final result of the proceedings is that PT Tansri Madjid the best of the Company’s knowledge the terms and Energi’s exploitation KP is valid, then the validity of the conditions of the authorisations in respect of all of the Final Bengkulu SIPP area, to the extent that it overlaps Projects have been complied with this should not be with such KP, could become the subject of a challenge construed as a guarantee that the authorisations will in later proceedings that could be brought by PT Tansri not be challenged or impugned by third parties. Madjid Energi.
(b) Recent Changes to Mining Law Further, specific information on the Company’s interests in the Projects, including information relevant for Under the recently promulgated New Mining Law, a new mining authorisation risk assessment (including the legal regime governing all aspects of exploration and above specific risks) is set out in S&T’s Abridged Legal mining in Indonesia, including licensing has recently Report in Section 8 of this Prospectus. been passed. The Indonesian Government has not yet published implementing regulations on how to change 10.3 Commodity Price Volatility from the authorisation/licensing system under the old mining law to the authorisation/licensing system under Commodity prices can fluctuate rapidly and are affected the new legal regime. by numerous factors beyond the control of Sumatra. These factors include world demand for base and other One basic principle under the new mining law regime metals, forward selling by producers, and production cost is that all new mining licences for metallic minerals levels in major metal‑producing regions.
are to be awarded through an auction process (the For personal use only use personal For details of which are not yet known). However, the new Moreover, commodity prices are also affected by mining law and the recently issued official circulars macroeconomic factors such as expectations regarding refer to certain already issued authorisations and inflation, interest rates and global and regional demand applications to conduct mining activities that will be for, and supply of, the commodity as well as general “grandfathered” in the process of converting into global economic conditions. These factors may have an mining licences under the new mining law regime adverse effect on Sumatra’s exploration, development without having to go through the auction process. and production activities, as well as on its ability to fund those activities.
60 SUMATRA COPPER & GOLD plc PROSPECTUS Risk Factors Cont.
10.4 Reliance on Indonesian Partners 10.6 Indonesian Mining Law
Sumatra is reliant on the continued co‑operation of its Prior to the passing of the new Mining Law the statutory Indonesian Partners (especially Adi Sjoekri) pursuant regime contemplated that the only way for foreign to the Co‑operation Agreement in its ability to secure parties to directly engage in mining business activities was and maintain its interest in the projects, particularly through a foreign investment company that has been in the early stages of each project, maintenance of a specifically incorporated to perform a CoW. KPs (such as genuinely co‑operative and constructive relationship those held by Sumatra’s Indonesian partners) could between Sumatra and its Indonesian partners will be only be issued to Indonesian nationals or an Indonesian crucial to the security of Sumatra’s interests going legal entity which was managed and wholly owned forward, regardless of the legal enforceability of any by Indonesian nationals. Moreover, the Indonesian agreements. An adverse change in this relationship Investment Law specifically prohibits local and foreign could have significant adverse consequences on the investors from entering into agreements or making Company’s interests. statements which stipulate that their share ownership in a limited liability company (such as NPM and Dwinad) is for Sumatra’s relationship with its Indonesian Partners and on behalf of a third party (which could be a foreign at present (Adi Sjoekri and two companies which he party, such as Sumatra). Such agreements or statements wholly owns) is paramount. Moreover, should Adi are further stated to be null and void. The purpose of this Sjoekri cease to be involved with the Company or provision is to avoid the situation the situation whereby the projects, for whatever reason, the capability of a company is nominally owned by one person but is the Company would be impaired pending a suitable controlled by another person. replacement being identified and retained by the Company. Identifying and retaining such replacements Nevertheless, it was common practice for the Indonesian would likely be a very lengthy process and prove holder of a KP to enter into a general mining services very difficult. agreement with a foreign‑owned mining services
company or PMA company, pursuant to which the PMA SECTION TEN Further details of general risks with respect to reliance company conducts all relevant activities to develop the on key personnel and key business relationships are particular mining project. This is what is contemplated detailed in Sections 10.10 and 10.11 below. under the Co operation Agreement should any of the projects proceed to the mining stage. 10.5 Regional Autonomy Legislation It should be noted that there are potential difficulties in In 1999 regional autonomy legislation was passed the enforcement of the Cooperation Agreement, should which introduced the delegation of what was once it ever be challenged, due to its inherent nature as a the central authority to the regions in a number mutually cooperative arrangement where no party has a of administrative areas. The legislation, however dominant position. The main obligations and duties under acknowledges that certain specific powers remain the Co-operation Agreement between Sumatra and the with the central authority, including foreign affairs, Indonesian Partners are to co‑operate with each other in security and defence, judicial, fiscal, monetary and the achievement of certain goals, which would likely be religious matters. Therefore, technically, the regions open to a degree of uncertainty and interpretation by the have the power to govern all matters except those Indonesian Courts. which are vested on the central authority, including mining. This legislation has had certain benefits for With respect to various ancillary documents currently investors wishing to invest at the local level, but at entered into between the Indonesian partners and, or times the dividing lines of responsibility are unclear or in favour of, Sumatra, although they reflect a typical contradictory, which can result in conflicts of interest ‘loan and security’ arrangement, these agreements are and competition between the central government, prone to certain legal weaknesses that could result in provinces and/or regencies and between provinces difficulties and uncertainty in enforcement.
For personal use only use personal For and regencies. This can lead to uncertainties and For the above reasons and other similar reasons set administrative confusion to which investors such as the out in Part I Sections 1(e) and 2(a)(4) of S&T’s Full Company and its Indonesian Partners are exposed. Legal Report the validity and enforceability of the Co‑operation Agreement and other related agreements is not beyond challenge.
SUMATRA COPPER & GOLD plc PROSPECTUS 61 Risk Factors Cont.
10.7 Forestry Issues caused by the survey or exploration activities of the Company and its Indonesian Partners. For further In order to conduct any mining activities (that is, survey, information, see the Abridged Legal Report by S&T in exploration or exploitation) in any forest area, a mining Section 8 of this Prospectus. company must obtain a relevant permit from the Department of Forestry. In broad terms, forestry areas In addition to the risks associated with environmental are divided into 2 main categories, protection forest laws and regulations, mining developments globally, and production forest. Some of the Projects in which including in Indonesia, can be subject to vigorous the Company and its Indonesian Partners have an anti‑development campaigns from non‑government interest fall into areas that are classified as forest areas. environmental and other organizations. Such campaigns can potentially disrupt any mining development. According to the Forestry Law, there is a blanket prohibition on open pit mining being conducted in 10.9 Exploration and Development Risks protection forest areas. If it were in the interests of the Company or its Indonesian Partners to undertake any Exploration is a high risk activity that requires large open pit mining in any protection forest area, it should amounts of expenditure over extended periods of time. be noted that the conversion process is a lengthy Currently there are no defined mineral reserves on the process which could take years and the process is Projects controlled by Sumatra and there can be no largely subject to the discretion of government officials. guarantee that the planned exploration programs will lead to successful exploration results and the discovery It should be noted that Forestry Permits required to carry of a commercial deposit or further, a commercial out exploration activities are not currently in place for each mining operation. of the Project areas where exploration is planned to be undertaken and the Company has no guarantee that such There is no assurance that exploration and development permits will be granted in the future. of the mineral interests owned by the Company, or any
SECTION TEN other projects that may be acquired by the Company in Further information on laws and rules relating to the future can be commercially exploited. protection forest are set out in S&T’s Abridged Legal Report in Section 8 of this Prospectus. The exploration costs of the Company described in Section 5 of this Prospectus are based on certain 10.8 Environmental Risks assumptions with respect to the method and timing of exploration. By their nature, these estimates and In addition to the protection forest restrictions assumptions are subject to significant uncertainties detailed above, exploration and mining projects in and, accordingly, the actual costs may materially general have varying levels and types of potential differ from these estimates and assumptions. impact on the natural environment and are subject Accordingly, no assurance can be given that the cost to relevant environmental legislation, including for estimates and the underlying assumptions will be land remediation and the management of hazardous realised in practice, which may materially and adversely and toxic waste and/or materials. The Company and affect the Company’s viability. its Indonesian partners are required to comply with this legislation and from time to time environmental 10.10 Key Personnel management issues may arise from factors beyond its control. The minerals industry has become subject The Company is highly dependent on its Directors and to increasing environmental responsibility and liability senior management. Whilst the Board has sought to and the potential for liability from such issues is an and will continue to ensure that Directors and any key ever‑present risk. employees are appropriately incentivised, their services cannot be guaranteed. The Company has a small It is also noted that the Company and its Indonesian management team and the continued involvement of Partners may already be in breach of some of the
For personal use only use personal For key employees, consultants and Directors is not assured. relevant environmental obligations by not filing their The loss of their services to the Company may have UKL and UPL studies. This may lead to liability which a material adverse effect on the performance of the may have a material adverse effect on the Company’s Company pending replacements being identified and and its Indonesian Partners, should there be any claims retained by the Company. in respect of environmental damage or pollution
62 SUMATRA COPPER & GOLD plc PROSPECTUS Risk Factors Cont.
10.11 Key Business Relationships not necessarily present in a developed country, which can impact on a range of factors such as sovereign risk, The Company and its Indonesian partners rely on safety, security, costs, ability to operate, country policy, good relationships with other entities, regulatory fiscal provisions and laws and can lead to delays or even and governmental departments, and community the suspension of any operations which may take place. leaders. While the Directors have no reason to believe No assurance can be given regarding the future stability otherwise, there can be no assurance that its existing of Indonesia. relationships will continue to be maintained or that new ones will be successfully formed and the Company Investors should be aware that country risks may affect and its Indonesian Partners could be adversely affected the Company and its operations and assets in Indonesia. by any such changes to these existing relationships or inability to form new ones. 10.15 Currency Risk
10.12 Operational Risks Currency fluctuations will affect exploration and development costs of the Company. Costs will be The operations of the Company may be affected by denominated in currencies other than United States various factors, including failure to locate or identify Dollars, for example the Rupiah, which is the national mineral deposits; failure to achieve predicted grades currency of Indonesia where the Company’s Projects in exploration and mining; operational and technical are based, or in Australian Dollars. Fluctuations difficulties encountered in exploration and mining; in exchange rates that the Company is exposed difficulties in commissioning and operating plant and to will cause fluctuations in its financial results, equipment; mechanical failure or plant breakdown; which are not necessarily related to the Company’s unanticipated metallurgical problems which may affect underlying operations. extraction costs; adverse weather conditions; industrial Currency fluctuations will also affect the potential and environmental accidents; industrial disputes;
future cash flow that the Company may realise from its SECTION TEN and unexpected shortages or increases in the costs of operations, since mineral production is likely to be sold consumables, spare parts, plant and equipment. in the world market in United States Dollars. 10.13 Reserves and Resource Estimates 10.16 Additional Requirements Reserve and resource estimates are expressions of for Capital judgement based on knowledge, experience and industry practice. Historical calculations or estimates The Company may require additional financial which were valid when originally calculated may alter resources to continue funding its future expansion significantly when new information or techniques and the development of its projects. No assurance become available. In addition, by their very nature, can be given that any such additional financing will resource and reserve estimates are imprecise and depend be available or that, if available, it will be available on to some extent on interpretations, which may prove to terms acceptable to the Company or its shareholders. be inaccurate. As further information becomes available The Company may in the future raise additional funds through additional drilling and analysis, the estimates through public or private financing. are likely to change. This may result in alterations to If additional funds are raised through the issue development and production plans which may, in turn, of equity securities, the percentage ownership of adversely affect the Company’s operations. the current shareholders of the Company will be reduced and such securities may, subject to requisite 10.14 Country Risk Shareholder approval, have rights, preferences or privileges senior to those of the holders of the The Company’s mining assets are located in Indonesia, Company’s Shares then in issue.
which introduces both sovereign and Indonesia domestic For personal use only use personal For economic risks to investors investing in the CDIs for If adequate funds are not available to satisfy either short Shares. Indonesia is a developing country subject to an or long‑term capital requirements, the Company may be emerging legal and political system compared with the required to limit its operations significantly. system in place in Australia. There are risks attaching to exploration operations in a developing country which are
SUMATRA COPPER & GOLD plc PROSPECTUS 63 Risk Factors Cont.
10.17 Insurance 10.20 Market Conditions
Exploration for and development of minerals involves The market price of the CDIs for Shares can fall hazards and risks that could result in the Company as well as rise and may be subject to varied and incurring losses and liabilities to third parties. There is a risk unpredictable influences on the market for equities in that the Company may not be insured against all losses general and resource exploration stocks in particular. or liabilities that could arise from its operations. If the Neither the Company nor the Directors warrant the Company incurs losses or liabilities which are not covered future performance of the Company or any return on by its insurance policies, the funds available for exploration an investment in the Company. and development will be reduced and the value and/or tenure of the Company’s assets may be compromised. Market perception of junior extraction and exploration companies may change, potentially affecting the value General Risks of investors’ holdings and the ability of the Company to raise further funds by the issue of further CDIs for Shares or otherwise. 10.18 Economic Risks
General economic conditions, movements in interest 10.21 Possible Volatility of the Price of and inflation rates and currency exchange rates may CDIs for Shares have an adverse effect on the Company’s exploration, development and production activities, as well as on its The market price of CDIs for Shares could be subject ability to fund those activities. to significant fluctuations due to various factors and events, including any regulatory or economic changes Further, share market conditions may affect the value affecting the Company’s operations, variations in of the Company’s quoted securities regardless of the the Company’s operating results, the price of tin, Company’s operating performance. Share market developments in the Company’s business or its
SECTION TEN conditions are affected by many factors including: competitors, or to changes in market sentiment towards the CDIs for Shares. The Company’s operating (a) general economic outlook; results and prospects from time to time may be below (b) interest rates and inflation rates; the expectations of market analysts and investors. (c) currency fluctuations; In addition, stock markets from time to time suffer (d) changes in investor sentiment toward particular significant price and volume fluctuations that affect market sectors; the market prices for securities and which may be unrelated to the Company’s operating performance. (e) the demand for, and supply of, capital; and Any of these events could result in a decline in the (f) terrorism or other hostilities. market price of CDIs for Shares.
Neither the Company nor the Directors can guarantee the future performance of the Company, value of 10.22 Investment Speculative the Company’s CDIs for Shares or any return on an The above list of risk factors should not to be considered investment in the Company. as exhaustive of the risks faced by the Company or by investors in the Company. The above factors, and 10.19 Dividends others not specifically referred to above, may in the future materially affect the financial performance of the There can be no assurance as to the level of any future Company and the value of the securities offered under dividends, if any. The declaration, payment and amount this Prospectus. Therefore, there is no guarantee that of any future dividends of the Company are subject to an investment in the CDIs for Shares will result in the the discretion of the directors of the Company and will payment of dividends, returns of capital or the market depend upon, amongst other things, the Company’s value of those CDIs for Shares. For personal use only use personal For earnings, financial position, cash requirements, availability of profits, as well as provisions for relevant Potential investors should consider that the investment regulations, statutory or otherwise, or generally in the Company is speculative and should consult their accepted accounting principles from time to time. professional advisers before deciding whether to apply for CDIs for Shares pursuant to this Prospectus.
64 SUMATRA COPPER & GOLD plc PROSPECTUS Additional Information
11.1 Articles of Association (d) Dividends
The current Articles of Association of the Company The Company may by ordinary resolution declare were adopted by a special resolution passed on dividends to be paid out of the profits of the Company 6 July 2009. The Articles of Association were amended available for distribution. No dividend shall be declared in to comply with the ASX Listing Rules, and the ASX has excess of the amount recommended by the Board. provided in principle confirmation that the form of The Board may, provided that in its opinion the profits the Articles of Association is consistent with the ASX of the Company justify such payment, pay interim Listing Rules. dividends from time to time of such amounts and on The following is a summary of the key provisions of such dates and in respect of such periods as it thinks fit. the Articles of Association and principal rights and Except as otherwise provided by the rights attached to restrictions of Shareholders. This summary is not the Shares, all dividends shall be declared and paid pro exhaustive, nor does it constitute a definitive statement rata according to the amounts paid up on the Shares of the rights and restrictions of Shareholders. in respect of which the dividend is declared and paid Investors should note that they will be issued with (b√dited) during any portion or portions of the period CDIs under this Prospectus. With the exception of in respect of which the dividend is declared. For these voting arrangements, holders of CDIs for Shares have purposes no amounts paid in advance of calls upon the the same rights as holders of Shares, which are legally members shall be treated as paid on the Shares. registered in their own name. Please see Section 11.2 Any dividend unclaimed for a period of 12 years from for more information about CDIs. the date on which the dividend becomes payable will (a) Application of Listing Rules be forfeited and will revert to the Company.
To the extent of any inconsistency between the Articles (e) Winding Up of Association and the ASX Listing Rules, the ASX The Company has only issued one class of Shares, Listing Rules prevail. which all rank equally in the event of winding up.
(b) General Meetings A liquidator may, with the authority of a special The Board may, whenever it thinks fit, and in resolution of Shareholders, divide among the accordance with the Companies Acts convene a shareholders in kind the whole or any part of the property of the Company, and may for that purpose
general meeting. Notice of every general meeting shall SECTION ELEVEN be given to every member of the Company who is, set such value as he considers fair upon any property under the Articles of Association, entitled to receive to be so divided, and may determine how the division such notices from the Company. is to be carried out as between the shareholders. The liquidator can with the sanction of a special (c) Voting Rights resolution of the Company’s shareholders vest the whole or any part of the assets in trust for the benefit Subject to any special terms as to voting upon which of shareholders as the liquidator thinks fit, but no Shares may be issued or may for the time being be shareholder of the Company can be compelled to held, on a show of hands every member present by accept any CDIs for Shares or other property in respect person or proxy shall have one vote for every share of which there is a liability. they hold. On a poll every member who is present by person or proxy shall have one vote for every fully paid (f) Purchase of Own Shares share they hold and a fraction of a vote equivalent to the proportion paid (not credited) on each share that is Subject to the Companies Acts, the Company may a partly paid share. purchase its own Shares (including any redeemable
For personal use only use personal For shares) or enter into such agreement (contingent or Where there are two or more joint holders of a share otherwise) in relation to the purchase of its own Shares and more than one of them is present at a general on such terms and in such manner as may be permitted meeting in person or by proxy and tenders a vote in by the Companies Act. For further information in respect of the share, the Company will count only the relation to the Company’s ability to purchase its own vote cast by, or on behalf of, the member whose name Shares under the Companies Act see Section 11.4 of appears first in the Company’s register of members. this Prospectus.
SUMATRA COPPER & GOLD plc PROSPECTUS 65 Additional Information Cont.
(g) Transfer of Shares The ASTC Settlement Rules require the Company to give notices to CDI holders of general meetings of In relation to a transfer of ordinary Shares which are in Shareholders. The notice of meeting must include certificated form: a form permitting the CDI holder to direct CHESS Depositary Nominees Pty Ltd to cast proxy votes in (i) such transfers may be effected by transfer in accordance with the CDI holder’s written directions. writing in any usual form or in such other form as CDI holders cannot vote personally at Shareholder the Board may approve. The instrument of transfer meetings. The CDI holder must convert their CDIs for shall be executed by or on behalf of the transferor Shares into certificated Shares prior to the relevant and (in the case of a partly paid share) by or on meeting in order to vote at the meeting in person. behalf of the transferee;
(ii) the Board may refuse to register any transfer of 11.3 Converting from a CDI to a Share partly paid Shares or Shares on which the Company has a lien or any instrument of transfer in favour CDI holders may at any time convert their holding of of a minor, infant, bankrupt or person with mental CDIs (tradeable on ASX) to certificated Shares: disorder; and (a) For CDIs held through the issuer sponsored (iii) the Board may not decline to register any sub‑register, contacting Computershare Investor instrument of transfer if the instrument of transfer Services Pty Limited in Australia directly to obtain is duly stamped (if required), is in respect of only the applicable request form. The removed holding one class of share and is in favour of not more than would then be registered into the same address four joint transferees, provided that to do so is not that appeared on the Australian CDI register; or contrary to the ASX Listing Rules. (b) for CDIs held on the CHESS sub‑register, contacting their controlling participant (generally a stockbroker), (h) Alteration of Capital who will liaise with Computershare Investor Services The Company may by ordinary resolution increase its Pty Limited in Australia to obtain and complete the share capital, consolidate or sub‑divide all or any of its request form. Shares or cancel any Shares which have not been taken Upon receipt of a request form, the relevant number or agreed to be taken by any person. of CDIs will be cancelled and Shares will be transferred Subject to the Companies Act and any other consent from CHESS Depositary Nominees Pty Ltd into the name required by law, the Company may by special of the CDI holder and a registered share certificate be SECTION ELEVEN resolution reduce its issued and authorised share issued. This will cause your Shares to be registered on capital, any capital redemption reserve fund or any the certificated UK register of Shares and trading will no share premium account or any other undistributable longer be possible on the ASX. reserves in any manner. A holder of Shares may also convert their Shares to CDIs for Shares, by contacting the Company secretary 11.2 Rights of CDI Holders in the United Kingdom (at 39 Parkside Cambridge Road CB1 1PN or [email protected]), Computershare With the exception of voting arrangements, Investor Services Pty Limited in Australia, or their CDI holders have the same rights as holders whose stockbroker (or applicable controlling participant). securities are legally registered in their own name. In this case, the Shares will be transferred from the The ASTC Settlement Rules require that all economic Shareholder’s name into the name of CHESS Depositary benefits, such as dividends, bonus issues, rights Nominees Pty Ltd and a holding statement will be issues or similar corporate actions flow through to issued for the CDIs. The CDIs will be tradeable on ASX. CDI holders as if they were the legal owners of the
underlying securities. For personal use only use personal For
66 SUMATRA COPPER & GOLD plc PROSPECTUS Additional Information Cont.
11.4 Differences between UK and Australian Corporate Law
The Company is incorporated under the laws of England and Wales. The following table sets out the principal differences between laws and regulations concerning shares in a company incorporated in England and Wales as opposed to Australia.
This summary is provided as a general guide only, and is not a comprehensive summary or analysis of all of the consequences resulting from acquiring, holding or disposing of shares or interests in such companies. The laws, rules, regulations and procedures described are subject to change from time to time, and investors should seek their own independent advice in relation to such differences.
Position in England and Wales Position in Australia
Pre‑emption rights
The Companies Act requires the offer of any issue of new shares The ASX Listing Rules permit directors to for cash to be made first to existing shareholders in proportion allot unissued shares without shareholder to their holdings, subject to the passing of a special resolution of approval (and without first offering them the shareholders (being a majority of not less than 75% of the to existing shareholders) up to a maximum Company’s shareholders at a general meeting) to dis‑apply such number equivalent to 15% of the issued pre‑emption rights. capital of the company prior to the allotment in any 12 month period. There is no binding limit on the dis‑application of pre‑emption rights, however UK institutional guidelines for listed companies state that such dis‑application rights should be limited to 5% of the issued share capital in any 12 month period (subject to an aggregate of 7.5% of the issued ordinary share capital in any rolling three‑year period).
Pre‑emption rights do not apply to allotments of shares which are wholly or partly paid up otherwise than for cash.
Pre‑emption rights do not apply to shares issued under an employee share scheme and to bonus shares. SECTION ELEVEN Auditors
Auditors of a public company have to be appointed before the There is no such requirement under end of each meeting at which the company’s annual accounts Australian law, although shareholders are are laid. There is no deemed re‑appointment of auditors of public required to approve the appointment of companies. a company’s auditors at the first annual
general meeting after their appointment. For personal use only use personal For
SUMATRA COPPER & GOLD plc PROSPECTUS 67 Additional Information Cont.
Position in England and Wales Position in Australia
Purchase of own securities
A publicly traded company incorporated in England and Wales can A company has the right to buy back its only purchase its own shares if the purchase has been authorised shares under Australian law. by a shareholders’ resolution and it is authorised to do so by its articles of association. Whilst English law requires approval of a Depending on the type of share buy‑back market purchase by an ordinary resolution (i.e. a resolution passed conducted and the number of shares that the by a simple majority of the company’s shareholders at a company company proposes to buy back, the proposal general meeting), UK institutional guidelines recommend that may need to be approved by a resolution of a special resolution of shareholders is passed to authorise the the shareholders. purchase of a company’s own shares. Such resolution must set out The Company is not subject to the provisions the amount of shares that the company can purchase, guidelines of the Corporations Act relating to for price and details of when the authority will expire. Off‑market buy‑backs. purchases must be sanctioned by a special resolution of the shareholders.
Institutional guidelines currently recommend that the authority to buy‑back shares should be limited to 10% of the issued share capital.
Listed companies must comply with disclosure obligations set out in the Listing Rules.
If a listed company wants to acquire 15% or more of any class of its shares, the purchase must be by way of a tender offer.
Rule 9 of the City Code on Takeovers and Mergers (the Code) could apply after a public company purchases its own shares if the percentage holding of the continuing shareholders increases.
Shares cannot be purchased unless they are fully paid‑up and the consideration for the purchase of shares must be paid on purchase.
SECTION ELEVEN Takeovers
The Company is subject to the Code as a public limited company The Corporations Act governs a takeover, incorporated in England and Wales. Subject to certain exceptions and contains a general rule that a person and limitations, a mandatory offer is required to be made under must not acquire a ‘relevant interest’ in Rule 9 of the Code where: issued voting shares of a company, if because of the transaction, a person’s voting power • a bidder and any persons acting in concert with it acquire in the company increases from 20% or shares carrying 30% or more of the voting rights of a target below to more than 20%, or increases from company; or a starting point which is above 20% but less than 90%. • if a bidder, together with any concert parties, increases its holding by way of acquisition of an interest in shares where its holding is Certain exceptions apply, such as not less than 30% but not more than 50% of the voting rights. acquisitions of relevant interests in voting shares made under takeover bids or made Rule 9 requires a mandatory offer to be made in cash and at the with shareholder approval, or creeping
highest price paid by the bidder (or any persons acting in concert acquisitions of not more than 3% in a For personal use only use personal For with it) for any interest in shares of the relevant class during the 6 month period. 12 months prior to the announcement of the offer. Australian law similarly permits compulsory Where a bidder obtains acceptances of at least 90% of the shares acquisition by persons holding a subject to the takeover offer (which excludes any shares held 90% interest in the relevant securities. by it or its concert parties) and acceptances of at least 90% of the voting rights carried by the shares subject to the offer, it can The Company is not subject to the provisions require the remaining shareholders who have not accepted the of the Corporations Act relating to changes offer to sell their shares on the terms of the offer. in control and takeovers of public companies.
68 SUMATRA COPPER & GOLD plc PROSPECTUS Additional Information Cont.
Position in England and Wales Position in Australia
Substantial shareholders
A shareholder in a listed company incorporated in England and Under the Corporations Act a shareholder Wales must notify the company of the percentage of its voting who begins or ceases to have a substantial rights if the percentage of voting rights which he holds as a holding in a listed company or has a shareholder (or holds, or is deemed to hold through his direct substantial holding in a listed company and or indirect holding of financial instruments) reaches, exceeds or there is a movement by at least 1% in their falls below 3%, 4%, 5%, 6%, 7%, 8%, 9%, 10% and each holding, must give notice to the company percentage threshold thereafter up to 100% as a result of an and the ASX. acquisition or disposal of shares or financial instruments. A person has a substantial holding if that A shareholder may also be required to notify the company if there person and that person’s associates have a is a change in his percentage of the voting rights as a result of a relevant interest in 5% or more of the voting change in the company's total voting rights (even if there is no shares in the company. acquisition or disposal of shares). The Company is not subject to the provisions of the Corporations Act relating to the disclosure of substantial holdings.
11.5 Employee Share Option Plan
The Board adopted the Employee Share Option Plan (Option Plan) on 11 July 2007 to allow certain individuals to be granted the right to subscribe for Shares in the Company, the principal terms of the Option Plan, as amended on 17 July 2009, are summarised below. The following options (Plan Options) have been issued to Directors and employees of the Company prior to the date of this Prospectus.
Name Date of Grant Number of Option Shares Option Price Warwick Morris 30 Sept 2008 2,200,000 A$0.20 Jocelyn Waller 11 Jul 2007 2,500,000 A$0.20
Alan Flint 11 Jul 2007 2,500,000 A$0.20 SECTION ELEVEN Alan Flint 4 Jun 2009 500,000 A$0.20 Lord Daresbury 11 Jul 2007 1,500,000 A$0.20 Michael Price 11 Jul 2007 750,000 A$0.20 Nur Tyas Mudadi 11 Jul 2007 60,000 A$0.20 Nur Tyas Mudadi 8 May 2009 20,000 A$0.20 Robert Broke 11 Jul 2007 30,000 A$0.20 Ahilan Thiyagarajah 8 May 2009 220,000 A$0.20 Dibiansyah Hamid 8 May 2009 100,000 A$0.20 Win Riyutara 8 May 2009 80,000 A$0.20 Bambang Prasetyono 8 May 2009 60,000 A$0.20
For personal use only use personal For Alfrim Stevadji 8 May 2009 100,000 A$0.20 Thamrin Munir 8 May 2009 60,000 A$0.20 Alisar Muntoi 8 May 2009 60,000 A$0.20 Steven Garwin 8 May 2009 220,000 A$0.20
No further options are currently proposed to be granted under the Option Plan either before or on Official Quotation. It is proposed that the powers of the Board in this connection will be operated through and on the recommendation of the Remuneration Committee.
SUMATRA COPPER & GOLD plc PROSPECTUS 69 Additional Information Cont.
All Plan Options were granted pursuant to the Option limited circumstances, in which case Plan Options Plan which, as amended has the following principal may be exercised within a limited period of the terms and conditions. cessation to the extent they have vested);
(a) Grant of Plan Options (iv) the exercise price of Plan Options granted when the Company is not listed on the ASX is the greater of The Board may grant Plan Options to employees, the Nominal Value of the Shares and the amount directors or consultants of the Company, or such other specified by the Board (which, for Plan Options third parties as the Board may in its discretion decide granted immediately prior to or in contemplation of (Qualifying Employees). However, if the Company an imminent listing, must be an amount equal to or is listed on the ASX, the Board may only grant Plan not less $0.20); Options to a director of the Company, or to any other person listed in ASX Listing Rule 10.14, if the grant is (v) the exercise price of Plan Options granted when approved by the Company’s shareholders. the Company is listed on the ASX is the greater of the Nominal Value of the Shares, the amount No Plan Options may be granted after 10 July 2017, specified by the Board and the amount equal to and the aggregate number of Shares in respect of the arithmetic average of the closing market prices which Plan Options may be granted may not exceed for the Share (as derived from the official list of the the greater of 12,000,000 and 10% of the number of ASX) over the ten dealing days prior to the date on Shares in issue immediately following the Company which a Plan Option is granted; and listing on the ASX. (vi) in the event that the Company is the subject of (b) Vesting of Employee Options an unconditional takeover offer or a scheme of arrangement that vests more than 50% of the Shares Plan Options vest subject to the listing of the Company in a person becomes effective, a Participant may on the ASX and the participant continuing to be engaged within 6 months exercise any vested but unexercised as a Qualifying Employee for at least six months after the Plan Options. At the end of that 6 month period all listing. The Plan Options will vest as follows: remaining Plan Options shall lapse.
(i) 50% will vest on the participant being engaged (d) Transfer of Plan Options as a Qualifying Employee for at least 12 months following the date of grant; and A Plan Option granted under the Option Plan is not transferable. (ii) the remaining 50% will vest on the participant SECTION ELEVEN being engaged as a Qualifying Employee for at least (e) Rights Attaching to Allotted Shares 24 months following the date of grant. All Shares allotted pursuant to the exercise of Plan Pursuant to a resolution passed at a General Meeting Options rank equally in all respects with Shares in issue of Shareholders held on 17 July 2009 and a Board as at the date of such allotment. meeting putting this resolution into effect on the same day, all Plan Options granted to Directors (as set out in The Company will at its own expense make an Section 11.8 will fully vest on listing. application to the ASX for Shares issued pursuant to the exercise of any Option to be admitted to the (c) Exercise of Plan Options Official List.
Plan Options may be exercised on the following terms: (f) Variation of Capital
(i) a Plan Option may only be exercised if it has vested; In the event of a variation of the share capital of the Company (by way of capitalisation or rights issue, (ii) a participant may not exercise Plan Options if they
For personal use only use personal For sub‑division, consolidation or reduction of Shares), are prohibited from dealing in Shares or rights over the Board may amend the exercise price of Plan Options Shares by the ASX Listing Rules; and number of Shares subject to any such Plan Option (iii) Plan Options may not be exercised and will lapse in such a manner as it considers fair and reasonable, if the participant has ceased to be a Qualifying provided that the exercise price of a Plan Option does Employee since the date the Plan Option was not fall below the Nominal Value of a Share and that the granted (other than by reason of injury, disability, amendment is in accordance with the ASX Listing Rules. ill‑health, redundancy or retirement and other
70 SUMATRA COPPER & GOLD plc PROSPECTUS Additional Information Cont.
(g) Amendments The Company must, as soon as reasonably practicable after the allotment of the Shares, apply for the The Board may alter the rules to the Option Plan, admission of the Shares allotted to the ASX. This will except that no alteration may be made which would require that CDIs for Shares be issued to the holder of alter to the disadvantage of a holder of Plan Options the Share Warrant that is exercised. any rights that have already accrued to that person. Minor amendments may be made without such (c) Maintenance of Sufficient Authorised Capital approval or agreement. The Company has undertaken to ensure that so long 11.6 Warrants as the Share Warrants are capable of being exercised, the Company will have sufficient authorised but As referred to in Section 3 of this Prospectus, warrants have unissued share capital to satisfy the exercise of the been granted to Macquarie Bank Limited (Macquarie) and Share Warrants in full. Mirabaud Securities Limited (Mirabaud). (d) Reorganisation of Capital Pursuant to an agreement dated 17 December 2007, the Company granted Macquarie share warrants If any reorganisation of the capital of the Company to subscribe for up to 50,000 Shares (as adjusted occurs while it the Company is listed on the ASX, the pursuant to the terms of the agreement) in the number of Shares to be issued upon exercise of the Company (Macquarie Warrants). Share Warrant and the exercise price to be paid per Share subscribed for is subject to adjustment upon any Pursuant to an agreement dated 14 January 2008, reorganisation of capital in the Company in accordance the Company granted Mirabaud share warrants to with ASX Listing Rules. subscribe for up to 1,483,750 Shares (as adjusted pursuant to the terms of the agreement) in the 11.7 Material Contracts Company (Mirabaud Warrants). Set out below is a summary of contracts (other than The following is summary of the principal terms of contracts entered into in the ordinary course of the Macquarie Warrants and Mirabaud Warrants business) entered into by the Company: (together the Share Warrants) are as follows: • within the two years preceding the date of this (a) Exercise of the Share Warrants document and which are or may be material to the Company; or The Macquarie Warrants may be exercised at any time SECTION ELEVEN up until 17 December 2010 by Macquarie providing • which contain any provision under which the Company the Company with an exercise notice and payment has any obligation or entitlement which is material to of the subscription price (being £0.15 per Share the Company as at the date of this Prospectus. subscribed for, as adjusted pursuant to the terms of the Macquarie Warrant). It should be noted some of the material contracts relating to the Company’s mineral project interests in The Mirabaud Warrants may be exercised at any time Indonesia are governed under Indonesian law and their up until 6 December 2010 by Mirabaud Securities material provisions are set out in the Full Legal Report, Limited providing the Company with an exercise notice an abridged version of which is set out in Section 8 of and payment of the subscription price (being £0.18 per this Prospectus. Share subscribed for, as adjusted pursuant to the terms of the Mirabaud Warrant). (a) Macquarie Facilities
(b) Issue of Shares On 24 September 2007, the Company entered into a bridge to equity facility agreement with Macquarie
For personal use only use personal For Upon exercise of a Share Warrant and payment of the (Primary Facility Agreement), which includes security relevant subscription price, the Company must issue by way of a fixed and floating charge over all the assets and allot to the Share Warrant holder the number of of the Company and the provision of limited undertakings Shares subscribed for within 14 days. Each Share issued in relation to that security from the Company’s Indonesian and allotted will rank pari passu with the Shares in Partners. The Primary Facility Agreement has been issue at the date of allotment. amended by mutual agreement between the parties.
SUMATRA COPPER & GOLD plc PROSPECTUS 71 Additional Information Cont.
Under the terms of the Primary Facility Agreement • Macquarie will be issued 5.95 options with an (as amended), which is the sole financing arrangement exercise price of A$0.20 for each A$1 that is drawn in place for the Company: down by the Company. Therefore, up to 1,488,000 options may be issued to Macquarie if the Short • Macquarie has made available to the Company a Term Facility is fully drawn. loan facility that may be used for the purposes of funding working capital and capital expenditure in As at the date of this Prospectus, the Company has not relation to the exploration and development by the drawn down any amounts under the Short Term Facility. and its Indonesian Partners of exploration portfolios in Indonesia pursuant to or in connection with the (b) MIS Corporate Pty Ltd Services Agreement Co‑operation Agreement (Primary Facility); On 20 May 2009 the Company entered into an • the Facility may drawn up to a maximum of agreement with MIS Corporate Pty Ltd (MIS) to provide US$3,000,000 and is currently fully drawn to corporate, professional administrative services to the US$3,000,000 (being approximately A$3,570,000); Company (MIS Agreement) including assisting the Company to satisfy: • 8.5% per annum interest (calculated daily) is payable on the Facility; • all Australian statutory requirements (including ASIC filings, ASX filings, statutory registers, annual • the Company must repay all amounts outstanding reports, minutes); under the Facility on the earlier of: • all accounting requirements (including book (i) 30 days after Sumatra receives any proceeds keeping, general ledgers, consolidations, payroll, from the Offer; and accounts payable, accounts receivable, fixed asset registers, comparisons of budgeted and actual (ii) 30 September 2009; financial results); • Macquarie has been granted options on the • all Australian taxation requirements (including following terms: company taxes, GST, capital gains tax and indirect (i) each option entitles Macquarie to acquire a taxes); and fully paid ordinary share in the capital of the • administrative requirements (including registered Company; office, postal address, telephone, facsimile and (ii) each option may be exercised from the earlier e‑mail facilities and secretarial services). SECTION ELEVEN of the date that the Company is listed on The fee for services provided by MIS prior to the Offer the ASX and 1 October 2009, to 5.00pm on will be: 18 June 2013; • an allotment of $200,000 worth of Shares at (iii) the exercise price of each option is $0.20; and $0.20 per Share (that is, 1,000,000 Shares) subject (iv) the number of options that Macquarie may to a successful close of the Offer and the Company exercise is the greater of 6,250,000 and the receiving approval for listing; and number of options calculated by dividing the • all reasonable out‑of‑pocket expenses incurred by amount outstanding under the Primary Facility MIS, such as travel, meals and accommodation on 1 October 2009 by the exercise price of each incurred in the performance of its services, subject option; and to the Company’s pre‑approval of expenses. • the Primary Facility Agreement is governed by the The fee for ongoing services provided by MIS to the laws of New South Wales. Company after the close of the Offer will be:
For personal use only use personal For On 14 August 2009, the Macquarie agreed to make a • $25,000 per month to be reviewed after four short terms facility for up to US$250,000 available to months; and the Company (Short Term Facility). Under the terms of the Short Term Facility: • all reasonable out‑of‑pocket expenses incurred by MIS, such as travel, meals and accommodation • any amounts that are drawn down under incurred in the performance of its services, subject the Short Term Facility must be repaid on to the Company’s pre‑approval of expenses. 30 September 2009; and
72 SUMATRA COPPER & GOLD plc PROSPECTUS Additional Information Cont.
During the 24 months preceding lodgement of this The non executive Directors are eligible to receive Prospectus with the ASIC, MIS Corporate Pty Ltd has Plan Options under the Employee Share Option Plan not received any other fees from the Company. at the absolute discretion of the Company.
(c) Directors Service Agreements The engagement of each non executive director may be terminated on 1 month’s written notice by Effective 1 July 2009, the Directors of the Company either party. Each non executive director is entitled entered into amended service agreements with the to accrued and unpaid directors’ fees for the period Company. The terms of these amended services of notice of termination. agreements (as governed by and construed in accordance with English law) are as follows. Further, each non executive director is:
(i) Executive Directors • entitled to be reimbursed for all reasonable travelling, hotel, and other similar out of pocket The executive directors of the Company are Jocelyn expenses incurred in the proper performance of Waller and Alan Flint. his duties as an executive director; and
Jocelyn Waller and Alan Flint are each entitled to an • subject to the restrictions in the Companies Act annual salary of A$100,000 for acting as Managing 1985 and the Articles of Association, entitled Director and Exploration Director respectively. to be indemnified by the Company against all The executive directors are eligible to receive Plan liabilities, costs, charges and expenses incurred by Options under the Employee Share Option Plan, him in the execution and discharge of his duties to or additional remuneration by way of bonus or the Company. otherwise, at the absolute discretion of the Company. (d) Obligation of the Company to Issue Shares The employment of each of the executive directors may be terminated by the executive director or Subject to the listing of the Company on the ASX the Company on 1 month’s written notice. Jocelyn or any other recognised securities exchange and the Waller is entitled to a termination payment of Company determining, acting reasonably, that to do so 1 month’s salary on termination of his employment would not materially prejudice its financial position and by either party. continued operation, the Company undertakes to:
As an alternative to an executive director’s serving (i) increase the salary payable to each director, and the a period of notice, the Company may make a period of termination notice that each director is payment in lieu of the basic salary and benefits entitled to, to an amount that is equivalent to that SECTION ELEVEN to which the executive director would have been provided to directors in similar roles in companies entitled during the period of notice of termination. that are comparable to the Company and in the same industry at that time; and An executive director is entitled to be reimbursed for all reasonable travelling, entertainment and other (ii) introduce a bonus scheme for executive directors similar out of pocket expenses incurred in the proper that is equivalent to bonus schemes for executives performance of his duties as an executive director. in similar roles in companies that are comparable to the Company and in the same industry at that time. (ii) Non Executive Directors Further, if at the time that the Company lists on the The non executive directors of the Company ASX or any other recognised securities exchange any are Warwick Morris, Dr. Michael Price and Lord directors fees or salary are accrued and unpaid, the Daresbury. Company may issue Shares to the director in lieu of any accrued and unpaid director’s fees or salary. The Warwick Morris is entitled to annual director’s fees of director agrees to accept the Shares issued to him in For personal use only use personal For A$50,000 for acting as the Company’s non executive satisfaction of the amount of accrued but unpaid salary Chairman. Each of Lord Daresbury and Michael Price or director’s fees that are equal the value of those is entitled to annual director’s fees of A$25,000 for Shares (calculated using the price of Shares issued acting as non executive directors of the Company. pursuant to the Offer).
SUMATRA COPPER & GOLD plc PROSPECTUS 73 Additional Information Cont.
The Company intends to issue Shares to Directors, 11.9 Remuneration following the close of the Offer, in lieu of Directors fees or salary that were accrued but unpaid as at The Company’s Articles of Association provide that the 30 June 2009 On the basis of an issue price of A$0.20 aggregate annual remuneration of Directors must not and an assumed £/A$ exchange rate of 0.50, the exceed £1,000,000 or such greater sum that may be Company intends to issue: determined by an ordinary resolution of the Company.
• 155,250 Shares to Jocelyn Waller in lieu of £15,525 The total remuneration paid to each of the Directors accrued but unpaid Directors’ fees and salary; since incorporation of the Company is as follows:
• 233,200 Shares to Alan Flint in lieu of £23,320 Director Remuneration accrued but unpaid Directors’ fees and salary; and Warwick Morris £77,260 • 150,000 Shares to Warwick Morris in lieu of £15,000 Jocelyn Waller £309,880 accrued but unpaid Directors’ fees and salary. Alan Flint £381,865 In addition to the issue of Shares described above, Lord Daresbury £33,750 the Company has agreed, subject to a successful close of the Offer and receiving approval for listing, Michael Price £33,750 to issue $100,000 worth of Shares at $0.20 per Share (that is, 500,000 Shares) to Tom Mann, in connection The remuneration of executive directors will be with marketing services provided in relation to the determined from time to time by the Board having Offer. If the conditions are satisfied the Directors intend regard to the nature and extent of their responsibilities. to issue the Shares prior to the Company being listed.
It is likely that those Shares will be subject to an escrow 11.10 Fees and Benefits for 24 months from the date of their issue. Other than as set out below or elsewhere in this Prospectus, no: 11.8 Disclosure of Interests (a) Director or proposed Director; Directors are not required under the Company’s Articles of Association to hold any Shares. As at the date of (b) person named in this Prospectus as performing a this Prospectus, the Directors have relevant interests in function in a professional advisory or other capacity Shares as set out in the table below: in connection with the preparation or distribution SECTION ELEVEN of this Prospectus; or Director Shares Plan Options (c) promoter of the Company, Warwick Morris1 643,328 2,200,000 has, or had within 2 years before lodgement of this Prospectus with the ASIC, any interest in: Jocelyn Waller2 4,767,098 2,500,000 Alan Flint 6,864,776 3,000,000 (a) the formation or promotion of the Company;
Lord Daresbury3 7,871,700 1,500,000 (b) any property acquired or proposed to be acquired Michael Price4 80,000 750,000 by the Company in connection with its formation or promotion or in connection with the offer of CDIs for Shares under this Prospectus; or Notes: 1 83,328 Shares are held by Mr W G Morris and 560,000 (c) the offer of CDIs for Shares under this Prospectus, Shares are held by Berrafall Pty Ltd (ATF Morris‑Hardwick
Superannuation Fund). and no amounts have been paid or agreed to be paid For personal use only use personal For 2 4,247,098 Shares are held by Jocelyn Waller and 520,000 and no benefits have been given or agreed to be given are held by Pershing Keen Nominees Ltd (a/c PUCLT). to any of those persons as an inducement to become, 3 2,224,000 Shares are held by HSDL Nominees Limited and or to qualify as, a Director of the Company or for 5,647,700 Shares are held by Nortrust Nominees Limited. services rendered in connection with the formation or 4 80,000 Shares are held by Shona Price. promotion of the Company or the offer of CDIs for Shares under this Prospectus.
74 SUMATRA COPPER & GOLD plc PROSPECTUS Additional Information Cont.
CSA has acted as Independent Geologist and has (c) Argonaut, its directors and its staff may participate prepared the Independent Technical Report which in the Offer. is incorporated into this Prospectus by reference. The Company estimates it will pay CSA a total of (d) During the 24 months preceding lodgement of this $63,000 (excluding GST) for these services. During the Prospectus with the ASIC, neither Argonaut Capital 24 months preceding lodgement of this Prospectus Limited nor Argonaut Securities Pty Limited has with the ASIC, CSA has received A$155,771 for other received any other fees from the Company. services to the Company. MIS Corporate Pty Ltd has provided corporate services Soemadipradja & Taher has acted as Indonesian solicitors to the Company, and has, or will, receive the fees set to the Company and has prepared the Abridged Legal out in Section 11.7(b). During the 24 months preceding Report which is included in Section 8 of this Prospectus lodgement of this Prospectus MIS Corporate Pty Ltd and the full Legal Report which is incorporated into has not received any fees from the Company. this Prospectus by reference. The Company estimates Subject to a successful close of the Offer and receiving it will pay Soemadipradja & Taher a total of $112,500 approval for listing on the ASX, but prior to listing, (excluding GST) for these services. During the 24 months the Company will issue $100,000 worth of Shares preceding lodgement of this Prospectus with the ASIC. at $0.20 per Share (that is, 500,000 Shares) to Tom Soemadipradja & Taher has received $536,323 for other Mann, in connection with advisory services provided in legal services to the Company. relation to the Offer. During the 24 months preceding Minter Ellison has acted as Australian lawyers to lodgement of this Prospectus Tom Man has not the Company in relation to the Offer. The Company received any fees from the Company. estimates it will pay Minter Ellison $80,000 for these services. Subsequently, fees will be charged in 11.11 Consents accordance with normal charge out rates. During the Each of the parties referred to in this Section: 24 months preceding lodgement of this prospectus with ASIC, Minter Ellison has not received any other (a) does not make, or purport to make, any statement fees from the Company. in this Prospectus other than those referred to in this Section; and Simmons & Simmons has acted as English solicitors to the Company in relation to the Offer. The Company (b) to the maximum extent permitted by law, expressly estimates it will pay Simmons & Simmons $54,000 for disclaim and take no responsibility for any part of these services. Subsequently, fees will be charged in this Prospectus other than a reference to its name SECTION ELEVEN accordance with normal charge out rates. During the and a statement included in this Prospectus with the 24 months preceding lodgement of this Prospectus consent of that party as specified in this Section. with the ASIC, Simmons & Simmons has received $1,253,219 for other legal services to the Company. CSA Global Pty Ltd has given its written consent to being named as Independent Geologist Technical Argonaut has acted in various roles including acting as Expert in this Prospectus and to the inclusion of the corporate and financial adviser to the Company and as Independent Technical Report in this Prospectus and broker to the Offer. Argonaut has the following interests: references to that report in the form and context in which they are included. CSA Global Pty Ltd has not (a) Argonaut Capital Limited, as financial and corporate withdrawn its consent prior to lodgement of this adviser in relation to the Offer, will be paid a Prospectus with the ASIC. corporate advisory fee of $75,000. Additionally, Argonaut Capital Limited will provide corporate Soemadipradja & Taher has given its written consent advice for a 4 month period from the date of Official to being named as the Indonesian solicitors to the Quotation for a fee of $10,000 per month. Company, in this Prospectus and to the inclusion of the
For personal use only use personal For Abridged Legal Report in Section 8 of this Prospectus (b) Argonaut Securities Pty Limited, as broker to the and the Full Legal Report and references to those reports Offer will receive a capital raising fee of 5% on the and to statements attributed to it in the Prospectus, amount raised by the Offer. Out of this commission in the form and context in which they are included. Argonaut Securities Pty Limited must pay other Soemadipradja & Taher has not withdrawn its consent licensed securities dealers in respect of any valid prior to lodgement of this Prospectus with the ASIC. applications lodged and accepted by the Company bearing the stamp of that licensed securities dealer or Australian financial services licensee.
SUMATRA COPPER & GOLD plc PROSPECTUS 75 Additional Information Cont.
Minter Ellison has given its written consent to being context in which they are included. Adi Sjoekri has named as the Australian lawyers to the Company not withdrawn his consent prior to lodgement of this in this Prospectus in the form and context in which Prospectus with the ASIC. they are named. Minter Ellison has not withdrawn its consent prior to the lodgement of this Prospectus with PT Dwinad Nusa Sejahtera has given its written consent the ASIC. to the inclusion of the statements attributed to it, and being named, in this Prospectus in the form and Argonaut Capital Limited has given its written consent context in which they are included. PT Dwinad Nusa to being named as corporate and financial adviser Sejahtera has not withdrawn its consent prior to to the Company in this Prospectus in the form and lodgement of this Prospectus with the ASIC. context in which they are named. Argonaut Capital Limited has not withdrawn its consent prior to PT Nusa Palapa Minerals has given its written consent lodgement of this Prospectus with the ASIC. to the inclusion of the statements attributed to it, and being named, in this Prospectus in the form and Argonaut Securities Pty Limited has given its written context in which they are included. PT Nusa Palapa consent to being named as Broker to the Offer in Minerals has not withdrawn its consent prior to this Prospectus in the form and context in which they lodgement of this Prospectus with the ASIC. are named. Argonaut Securities Pty Limited has not withdrawn its consent prior to lodgement of this Each of the following persons has given his written consent Prospectus with the ASIC. to the inclusion of the statements attributed to them, and being named, in this Prospectus and the Independent Snowden has given its written consent to the inclusion Technical Report in the form and context in which they of the statements attributed to it, and being named, are included, and has not withdrawn his consent prior to in this Prospectus and the Independent Technical lodgement of this Prospectus with the ASIC: Report in the from and context in which such references are included. Snowden has not withdrawn (a) Frank Blanchfield; its consent prior to lodgement of this Prospectus with (b) Steven Garwin; the ASIC. (c) Matthew Nimmo;
Computershare Investor Services Pty Limited has given (d) David Stock; and its written consent to being named as the Company’s (e) Michael Jackson. Share Registry in this Prospectus in the form and context in which they are named. Computershare 11.12 Expenses of the Offer
SECTION ELEVEN Investor Services Pty Limited has had no involvement in the preparation of any part of the Prospectus other The total expenses2 of the Offer are estimated to be than being named as the Company’s Share Registry. approximately $1,172,4801. Computershare Investor Services Pty Limited has not authorised or caused the issue of, and expressly A$ disclaims and takes no responsibility for, any part Commissions to brokers 600,000 of the Prospectus. Computershare Investor Services Pty Limited has not withdrawn its consent prior to ASX/ASIC fees 33,605 lodgement of this Prospectus with the ASIC. Legal fees 266,500
Mineral Engineering Technical Services Pty Ltd has Professional corporate fees 105,000 given its written consent to the inclusion of the Independent Technical Experts fees 63,000 statements attributed to it, and being named in, this Prospectus and Independent Technical Report Printing and associated costs 20,000 in the from and context in which they are included. Professional accounting fees 69,375 Mineral Engineering Technical Services Pty Ltd has
For personal use only use personal For Miscellaneous expenses 15,000 not withdrawn its consent prior to lodgement of this Prospectus with the ASIC. Notes: Adi Sjoekri has given his written consent to the 1 The table of expenses is based on the Offer raising inclusion of the statements attributed to him, $12,000,000. and being named, in this Prospectus in the form and 2 An additional 1,500,000 Shares will be issued to parties promoting the Offer, equivalent to $300,000.
76 SUMATRA COPPER & GOLD plc PROSPECTUS Additional Information Cont.
11.13 Litigation 11.15 Taxation
Other than the ongoing Court proceedings in relation At the date of this Prospectus the Company is not to the Disputed Areas in Lebong (details of which can in production and does not anticipate generating be found in the Abridged Legal Report In Section 8.2(d) revenue or profits or issuing dividends in the immediate of this Prospectus), as at the date of this Prospectus the future. Considering that tax laws of Indonesia, the UK Company is not involved in any legal proceedings and and Australia may change between the date of this the Directors are not aware of any legal proceedings Prospectus and the time when the Company begins pending or threatened against the Company. generating revenue or profits, or paying dividends, the directors do not consider that a description of the 11.14 Electronic Prospectus taxation of future revenues, profits or dividends in those jurisdictions is information that is material to an Pursuant to Class Order 00/044, the ASIC has investor’s decision whether to invest in the Company’s exempted compliance with certain provisions of the CDIs for Shares. The Company will update shareholders Corporations Act to allow distribution of an electronic in relation to such tax implication closer to the time prospectus and electronic application form on the that the Company begins to generate revenue or basis of a paper prospectus lodged with the ASIC, profits or pay dividends. and the publication of notices referring to an electronic prospectus or electronic application form, subject to The acquisition and disposal of CDIs for Shares will compliance with certain conditions. have tax consequences for investors, which will differ depending on the circumstances and holding of each If you have received this Prospectus as an electronic investor. All potential investors in the Company are Prospectus, please ensure that you have received the urged to take independent financial advice about the entire Prospectus accompanied by the Application taxation and any other consequences of acquiring and Form. If you have not, please email the Company selling securities in the Company. at info@sumatra‑copper‑gold.com and the Company will send you, for free, either a hard To the maximum extent permitted by law, the copy or a further electronic copy of this Prospectus Company, its officers and each of their respective or both. Alternatively, you may obtain a copy of advisers accept no liability and responsibility with this Prospectus from the Company’s website at respect to the taxation consequences of subscribing for www.sumatra‑copper‑gold.com/prospectus.html. CDIs for Shares under this Prospectus.
The Company reserves the right not to accept an 11.16 Forecasts Application Form from a person if it has reason to SECTION ELEVEN believe that when that person was given access to The Directors have considered the matters set out in the electronic Application Form, it was not provided ASIC Regulatory Guide 170 and believe that they do together with the electronic Prospectus and any not have a reasonable basis to forecast future earnings relevant supplementary or replacement prospectus or on the basis that the operations of the Company are any of those documents were incomplete or altered. inherently uncertain. Accordingly, any forecast or projection information would contain such a broad range of potential outcomes and possibilities that it is not possible to prepare a reliable best estimate forecast
or projection. For personal use only use personal For
SUMATRA COPPER & GOLD plc PROSPECTUS 77 Directors’ Authorisation
This Prospectus is issued by the Company and its issue has been authorised by a resolution of the Directors.
In accordance with Section 720 of the Corporations Act, each Director has consented to the lodgement of this Prospectus with the ASIC.
Warwick G Morris Chairman
For and on behalf of Sumatra Copper & Gold plc
SECTION TWELVE For personal use only use personal For
78 SUMATRA COPPER & GOLD plc PROSPECTUS Glossary
Where the following terms are used in this Prospectus Closing Date means the closing date of the Offer as they have the following meanings: set out in Section 3.12 of this Prospectus (subject to the Closing Date being extended or the Offer being A$ or $ or cents means Australian currency. closed early).
Abridged Legal Report means the abridged legal Co‑operation Agreement means an agreement report prepared by Soemadipradja & Taher to include in between Sumatra, Adi Sjoekri, NPM and Dwinad Section 8 of this Prospectus which is based on the Full dated 18 July 2007, as amended and restated by the Legal Report. parties on 20 June 2008, and as further amended by Addendum Agreement dated 2 July 2009. Adi Sjoekri means Mr Adi Adriansyah Sjoekri, an Indonesian national and principal shareholder of Corporations Act means the Corporations Act 2001 (Cth). Dwinad and NPM, which, together with Adi Sjoekri, are Sumatra’s Indonesian Partners. CoW or Contract of Work means a Contract of Work, between the Government of Indonesia and a Contractor Application Form means the application form in Indonesia in which the Contractor is granted attached to or accompanying this Prospectus relating contractual mining rights as described in the Abridged to the Offer. Legal Report by S&T in Section 8 of this Prospectus and further described in the Full Legal Report. Argonaut means the Argonaut Group, an investment and advisory house including Argonaut Capital Limited CSA or CSA Global means CSA Global Pty Ltd, trading and Argonaut Securities Pty Ltd. as CSA Global, a company incorporated in Australia, whose Independent Expert’s Report is contained in Articles of Association means the articles of Section 7 of the Prospectus. association of the Company. Directors means the directors of the Company at the ASIC means Australian Securities & Investments date of this Prospectus. Commission. Exposure Period means the period of 7 days after the ASTC means ASX Settlement and Transfer date of lodgement of this Prospectus, which period Corporation Pty Ltd (ACN 008 504 532). may be extended by the ASIC by not more than 7 days ASTC Settlement Rules means the operating rules pursuant to Section 727(3) of the Corporations Act. of ASTC for the settlement processing facility for Full Legal Report means the Legal Report ASX’s markets. on Indonesian Mining Interests prepared by ASX means ASX Ltd (ABN 98 008 624 691) or, Soemadipradja & Taher at the request of the Company, as the context requires, the market that it operates. which was filed with ASIC on 25 August 2009.
Board means the board of Directors as constituted GBP or £ or pence or p means UK currency. SECTION THIRTEEN from time to time. Independent Technical Report or ITR means the CDIs or CDIs for Shares means CHESS Depositary independent technical expert’s report by CSA Global, Interests which are units of beneficial ownership of Shares. the Executive Summary of which is contained in Section 7 of this Prospectus. CHESS means the clearing house electronic sub‑register system of share transfers operated by the Indonesian Partner or Partners means collectively ASX Settlement and Transfer Corporation Pty Ltd. Adi Sjoekri, Dwinad and NPM.
Company or Sumatra means Sumatra IUP means a form of mineral licence in Indonesia as Copper & Gold plc (Registration Number 5777015), described in the Abridged Legal Report by S&T in
For personal use only use personal For a company incorporated in English and Wales and Section 8 of this Prospectus. registered in Australia under the Corporations Act JORC means the Australasian Joint Ore Reserves 2001 (ABN 14 136 694 267). Committee. Companies Act means the Companies Act 1985 (UK), KP means a form of mineral licence in Indonesia as the Companies Act 1989 (UK) and the Companies Act described in the Abridged Legal Report by S&T in 2006 (UK), as each is enacted or amended from time to Section 8 of this Prospectus and as further described in time, and where the context requires one of these Acts. the Full Legal Report.
SUMATRA COPPER & GOLD plc PROSPECTUS 79 Glossary Cont.
Listing Rules means the official listing rules of ASX. Projects means the survey and exploration projects in which the Company and its Indonesian Partners have Macquarie means Macquarie Bank Limited. an interest, known as Tembang, Sontang, Lebong and Tandai, as referred to and summarised in Section 3.3 of Manto means strata bound deposits first described this Prospectus. in Chile, where they sit within sedimentary strata overlying large granitic intrusions, in regions adjacent Prospectus means this prospectus. to porphyry copper deposits. S&T means Soemadipradja & Taher, the Company’s Mirabaud means Mirabaud Securities Limited. legal advisers as to Indonesian law.
Nominal Value means £0.01 per Share. Share means a fully paid ordinary share in the capital of the Company. NPM means PT Nusa Palapa Minerals, a company incorporated in Indonesia and one of Sumatra’s Share Registry means Computershare Investor Indonesian Partners. Services Pty Limited (ABN 48 078 279 277).
Offer means the offer of CDIs for Shares pursuant to Shareholder means a holder of Shares or CDIs for Shares. this Prospectus as set out in Section 4 of this Prospectus. SIPP means a form of mineral licence in Indonesia Official List means the Official List of ASX. as described in the Abridged Legal Report by S&T in Section 8 of this Prospectus and as further described in Official Quotation means official quotation by ASX in the Full Legal Report. accordance with the Listing Rules. Snowden means Snowden Mining Industry Option means an option to acquire a Share. Consultants, of 87 Colin Street, West Perth 6005, Option Plan means the employee share option Western Australia. plan to terms of which are set out in Section 11.5 of USD or US$ means United States currency. this Prospectus. Warrant(s) means warrants to subscribe for Shares. Prefeasibility Study or PFS means a study on alternatives for the development of a mining operation WST means Western Standard Time Perth, in respect of a defined mineral deposit(s) that is in Western Australia. sufficient detail to demonstrate the technical and financial viability of each alternative.
SECTION THIRTEEN For personal use only use personal For
80 SUMATRA COPPER & GOLD plc PROSPECTUS Registry Use Only
6XPDWUD&RSSHU *ROGplc ABN 14 136 694 267 Application Form Broker Code Adviser Code This Application Form is important. If you are in doubt as to how to deal with it, please contact your stockbroker or professional adviser without delay. You should read the entire prospectus carefully before completing this form. To meet the requirements of the Corporations Act, this Application Form must not be distributed unless included in, or accompanied by, the prospectus. W A I/We apply for B I/ e lodge full Application Money A$ .
Number of CHESS Depository Interests (CDI's) in6XPDWUD&RSSHU *ROG plc ("the Company") at $0.20 per CDI or such lesser number of CDI's which may be allocated to me/us. C Individual/Joint applications - refer to naming standards overleaf for correct forms of registrable title(s) Title or Company Name Given Name(s) Surname
Joint Applicant 2 or Account Designation
Joint Applicant 3 or Account Designation
D Enter your postal address - Include State and Postcode Unit Street Number Street Name or PO Box /Other Information
City / Suburb / Town State Postcode
E Enter your contact details Contact Name Telephone Number - Business Hours / After Hours ( )
F CHESS Participant Holder Identification Number (HIN) Please note that if you supply a CHESS HIN but the name and address details on your form do not correspond exactly with the registration details held at CHESS, your application will be deemed to be made X without the CHESS HIN, and any securities issued as a result of the IPO will be held on the Issuer Sponsored subregister. Payment details – Please note that funds are unable to be directly debited from your bank account Drawer Cheque Number BSB Number Account Number Amount of cheque
Gonly use personal For A$
Make your cheque or bank draft payable to “Sumatra Copper & Gold plc - share offer account " in Australian currency and cross it Not Negotiable. Your cheque or bank draft must be drawn on an Australian Bank.
By submitting this Application Form, I/we declare that this application is completed and lodged according to the Prospectus and the declarations/statements on the reverse of this Application form and I/we declare that all details and statements made by me/us (including the declaration on the reverse of this Application Form) are complete and accurate. I/We agree to be bound by the Memorandum & Articles of Association of the Company.
See back of form for completion guidelines How to complete this form A CDI's Applied for F CHESS Enter the number of CHESS Depository Interests (CDI's) you wish to apply for. 6XPDWUD&RSSHU *ROGplc will apply to the ASX to participate in The application must be for a minimum ofCDI's. Applications for CHESS, operated by ASX Settlement and Transfer Corporation Pty Ltd, greater than 10,000 CDI's must be in multiples ofCDI's. a wholly owned subsidiary of Australian Securities Exchange Limited. In CHESS, the Company will operate an electronic CHESS Subregister B Application Monies of security holdings and an electronic Issuer Sponsored Subregister Enter the amount of Application Monies. To calculate the amount, multiply of security holdings. Together the two Subregisters will make up the the number ofCDI's by the price per CDI. Company’s principal register of securities. The Company will not be issuing certificates to applicants in respect ofCDI'sallotted. If you C Applicant Name(s) are a CHESS participant (or are sponsored by a CHESS participant) and you wish to holdCDI's allotted to you under this Application on Enter the full name you wish to appear on the statement of security holding. the CHESS Subregister, enter your CHESS HIN. Otherwise, leave this This must be either your own name or the name of a company. Up to 3 section blank and on allotment, you will be sponsored by the Company and joint Applicants may register. You should refer to the table below for the allocated a Securityholder Reference Number (SRN). correct forms of registrable title. Applications using the wrong form of names may be rejected. Clearing House Electronic Subregister System Payment (CHESS) participants should complete their name identically to that G presently registered in the CHESS system. Make your cheque or bank draft payable to6XPDWUD&RSSHU *ROGplc sKDUHofferaFFRXQWLQ$XVWUDOLDQcurrency and cross it Not Negotiable. D Postal Address Before completing the Application Form the applicant(s) should read this prospectus to which this application relates. By lodging the Application Form, the applicant agrees that this application forCDI's in6XPDWUD&RSSHU *ROGplc is upon and subject to the terms of the prospectus and the Memorandum & Articles of association of Sumatra Copper & Gold plc, DJUHHVWRWDNHany number ofCDI'sthat may be allotted to the Applicant(s) pursuant to the prospectus and declares that all details and statements made are complete and accurate. It is not necessary to sign the Application Form. Lodgement of Application Application Forms must be received by 6XPDWUD&RSSHU *ROGplc by no later thanSP WST on16 September 2009. You should allow sufficient time for this to occur. Return the Application Form with cheque(s) attached to: Argonaut Securities Pty Limited or delivered to: Argonaut Securities Pty Limited GPO Box 2553 Level 30, Allendale Square PERTH WA 6001 77 St. Georges Terrace PERTH WA 6000 The Company accepts no responsibility if you lodge this Application Form at any other address or by any other means. Privacy Statement Personal information on this form is collected by Sumatra Copper & Gold plc. The personal information will be provided to Computershare Investor Services Pty Limited ("CIS") as registrar for securities issued by Sumatra Copper and Gold plc ("the issuer"), for the purpose of maintaining registers of securityholders, facilitating distribution payments and other corporate actions and communications. Your personal information may be disclosed to CIS related bodies corporate, to external service companies such as print or mail service providers, or as otherwise required or permitted by law. If you would like details of your personal information held by CIS, or you would like to correct information that is inaccurate, incorrect or out of date, please contact CIS. In accordance with the Corporations Act 2001, you may be sent material (including marketing material) approved by the issuer in addition to general corporate communications. You may elect not to receive marketing material by contacting CIS. You can contact CIS after listing date by e-mailing [email protected] you have any enquiries concerning your application, please contact the 6XPDWUD&RSSHU *ROG3/& on . Correct forms of registrable title(s) Note that ONLY legal entities are allowed to holdCDI's. Applications must be made in the name(s) of natural persons, companies or other legal entities in accordance with the Corporations Act. At least one full given name and the surname is required for each natural person. The name of the beneficial owner or any other registrable name may be included by way of an account designation if completed exactly as described in the examples of correct forms of registrable title(s) below. Type of Investor Correct Form of Registration Incorrect Form of Registration Individual Mr John Alfred Smith J.A Smith - Use given name(s) in full, not initials Joint Mr John Alfred Smith & John Alfred & - Use given name(s) in full, not initials Mrs Janet Marie Smith Janet Marie Smith Company ABC Pty Ltd ABC P/L - Use company title, not abbreviations ABC Co Trustsonly use personal For - Use trustee(s) personal name(s) Ms Penny Smith Penny Smith Family Trust - Do not use the name of the trust Minor (a person under the age of 18) Mr John Alfred Smith Peter Smith - Use the name of a responsible adult with an appropriate designation 6XPDWUD&RSSHU *ROGplc ABN 14 136 694 267 Application Form Broker Code Adviser Code This Application Form is important. If you are in doubt as to how to deal with it, please contact your stockbroker or professional adviser without delay. You should read the entire prospectus carefully before completing this form. To meet the requirements of the Corporations Act, this Application Form must not be distributed unless included in, or accompanied by, the prospectus. W A I/We apply for B I/ e lodge full Application Money A$ . Number of CHESS Depository Interests (CDI's) in6XPDWUD&RSSHU *ROG plc ("the Company") at $0.20 per CDI or such lesser number of CDI's which may be allocated to me/us. C Individual/Joint applications - refer to naming standards overleaf for correct forms of registrable title(s) Title or Company Name Given Name(s) Surname Joint Applicant 2 or Account Designation Joint Applicant 3 or Account Designation D Enter your postal address - Include State and Postcode Unit Street Number Street Name or PO Box /Other Information City / Suburb / Town State Postcode E Enter your contact details Contact Name Telephone Number - Business Hours / After Hours ( ) F CHESS Participant Holder Identification Number (HIN) Please note that if you supply a CHESS HIN but the name and address details on your form do not correspond exactly with the registration details held at CHESS, your application will be deemed to be made X without the CHESS HIN, and any securities issued as a result of the IPO will be held on the Issuer Sponsored subregister. Payment details – Please note that funds are unable to be directly debited from your bank account Drawer Cheque Number BSB Number Account Number Amount of cheque Gonly use personal For A$ Make your cheque or bank draft payable to “Sumatra Copper & Gold plc - share offer account " in Australian currency and cross it Not Negotiable. Your cheque or bank draft must be drawn on an Australian Bank. By submitting this Application Form, I/we declare that this application is completed and lodged according to the Prospectus and the declarations/statements on the reverse of this Application form and I/we declare that all details and statements made by me/us (including the declaration on the reverse of this Application Form) are complete and accurate. I/We agree to be bound by the Memorandum & Articles of Association of the Company. See back of form for completion guidelines How to complete this form A CDI's Applied for F CHESS Enter the number of CHESS Depository Interests (CDI's) you wish to apply for. 6XPDWUD&RSSHU *ROGplc will apply to the ASX to participate in The application must be for a minimum ofCDI's. Applications for CHESS, operated by ASX Settlement and Transfer Corporation Pty Ltd, greater than 10,000 CDI's must be in multiples ofCDI's. a wholly owned subsidiary of Australian Securities Exchange Limited. In CHESS, the Company will operate an electronic CHESS Subregister B Application Monies of security holdings and an electronic Issuer Sponsored Subregister Enter the amount of Application Monies. To calculate the amount, multiply of security holdings. Together the two Subregisters will make up the the number ofCDI's by the price per CDI. Company’s principal register of securities. The Company will not be issuing certificates to applicants in respect ofCDI'sallotted. If you C Applicant Name(s) are a CHESS participant (or are sponsored by a CHESS participant) and you wish to holdCDI's allotted to you under this Application on Enter the full name you wish to appear on the statement of security holding. the CHESS Subregister, enter your CHESS HIN. Otherwise, leave this This must be either your own name or the name of a company. Up to 3 section blank and on allotment, you will be sponsored by the Company and joint Applicants may register. You should refer to the table below for the allocated a Securityholder Reference Number (SRN). correct forms of registrable title. Applications using the wrong form of names may be rejected. Clearing House Electronic Subregister System Payment (CHESS) participants should complete their name identically to that G presently registered in the CHESS system. Make your cheque or bank draft payable to6XPDWUD&RSSHU *ROGplc sKDUHofferaFFRXQWLQ$XVWUDOLDQcurrency and cross it Not Negotiable. D Postal Address Before completing the Application Form the applicant(s) should read this prospectus to which this application relates. By lodging the Application Form, the applicant agrees that this application forCDI's in6XPDWUD&RSSHU *ROGplc is upon and subject to the terms of the prospectus and the Memorandum & Articles of association of Sumatra Copper & Gold plc, DJUHHVWRWDNHany number ofCDI'sthat may be allotted to the Applicant(s) pursuant to the prospectus and declares that all details and statements made are complete and accurate. It is not necessary to sign the Application Form. Lodgement of Application Application Forms must be received by 6XPDWUD&RSSHU *ROGplc by no later thanSP WST on16 September 2009. You should allow sufficient time for this to occur. Return the Application Form with cheque(s) attached to: Argonaut Securities Pty Limited or delivered to: Argonaut Securities Pty Limited GPO Box 2553 Level 30, Allendale Square PERTH WA 6001 77 St. Georges Terrace PERTH WA 6000 The Company accepts no responsibility if you lodge this Application Form at any other address or by any other means. Privacy Statement Personal information on this form is collected by Sumatra Copper & Gold plc. The personal information will be provided to Computershare Investor Services Pty Limited ("CIS") as registrar for securities issued by Sumatra Copper and Gold plc ("the issuer"), for the purpose of maintaining registers of securityholders, facilitating distribution payments and other corporate actions and communications. Your personal information may be disclosed to CIS related bodies corporate, to external service companies such as print or mail service providers, or as otherwise required or permitted by law. If you would like details of your personal information held by CIS, or you would like to correct information that is inaccurate, incorrect or out of date, please contact CIS. In accordance with the Corporations Act 2001, you may be sent material (including marketing material) approved by the issuer in addition to general corporate communications. You may elect not to receive marketing material by contacting CIS. You can contact CIS after listing date by e-mailing [email protected] you have any enquiries concerning your application, please contact the 6XPDWUD&RSSHU *ROG3/& on . Correct forms of registrable title(s) Note that ONLY legal entities are allowed to holdCDI's. Applications must be made in the name(s) of natural persons, companies or other legal entities in accordance with the Corporations Act. At least one full given name and the surname is required for each natural person. The name of the beneficial owner or any other registrable name may be included by way of an account designation if completed exactly as described in the examples of correct forms of registrable title(s) below. Type of Investor Correct Form of Registration Incorrect Form of Registration Individual Mr John Alfred Smith J.A Smith - Use given name(s) in full, not initials Joint Mr John Alfred Smith & John Alfred & - Use given name(s) in full, not initials Mrs Janet Marie Smith Janet Marie Smith Company ABC Pty Ltd ABC P/L - Use company title, not abbreviations ABC Co Trustsonly use personal For - Use trustee(s) personal name(s) Ms Penny Smith Penny Smith Family Trust - Do not use the name of the trust Minor (a person under the age of 18) Mr John Alfred Smith Peter Smith - Use the name of a responsible adult with an appropriate designation 4003 Designed and Produced by RDAFor Creative www.rda.com.au personal use only SUMATRA COPPER & GOLD plc ABN 14 136 694 267 SUMATRA COPPER & GOLD plc PROSPECTUS For personal use only use personal For For an offer of 60,000,000 CDIs for Shares at an Corporate Adviser issue price of $0.20 each to raise $12,000,000. and Lead Manager IMPORTANT INFORMATION This is an important document that should be read in its entirety. If you do not understand it you should consult your professional advisers without www.sumatra‑copper‑gold.com delay. The CDIs for Shares offered by this Prospectus should be considered highly speculative.