Memorandum of Understanding signed with Lucky C...
11/01/2010
GB00B23JN426/GBP/PLUS-exn
Oracle Coalfields Plc
("Oracle" or the "Company")
Memorandum of Understanding signed with Lucky Cement Limited, a major cement manufacturer in Sindh
Province, Pakistan
The Board of Oracle Coalfields PLC (PLUS: ORCP) ("Oracle" or "the Company"), the UK developer of a
1.4 billion tonne coal deposit in southern Pakistan, is pleased to announce that the Company has
entered into a Memorandum of Understanding ("MOU") with Lucky Cement Limited ("LUCKY"), a major
cement manufacturer and exporter based in Pakistan.
Brief background on LUCKY
Lucky Cement Limited is a subsidiary of Yunus Brothers Group ("YB Group"), one of the largest
business groups in Pakistan and has been based in Karachi for over 50 years. The YB Group is
engaged in diversified manufacturing activities including textiles, and power generation. Lucky
Cement is listed on the Karachi, Lahore and Islamabad stock exchanges and its Global Depositary
Receipts are traded on the London Stock Exchange. LUCKY's local market capitalisation is US$260
million equivalent.
LUCKY is currently the largest cement company in Pakistan and the country's largest exporter to
the Middle-East, India, Sri Lanka and Africa. In 2009, LUCKY posted year-on-year revenue and
operating profit growth of 55% and 135%, respectively.
Salient features of MOU
The salient features of the MOU are as follows:
- Oracle's primary objective is the development of its Block VI project to supply lignite
coal to a mine-mouth power plant(s). In addition and in the interim, the Company is also pursuing
the potential for early cash flow from the supply of lignite coal to the local cement industry.
- LUCKY has expressed an interest in using the indigenous coal to be mined at Block VI,
Tharparkar, after techno-commercial evaluation of the coal, for its cement plants.
- LUCKY shall subsequently assess the costing for transportation and utilisation of this
lignite in its cement kilns with minimum effects on the pyro-process and shall try to reach a
commercially viable solution before entering into a Coal Supply Agreement ("CSA").
- Oracle and LUCKY have agreed to cooperate on the exchange of relevant information and
future planning so that they may reach a workable arrangement for Oracle through its local
subsidiary Sindh Carbon Energy Limited ("SCEL") to supply coal to LUCKY.
- At an appropriate time mutually agreed by Oracle and LUCKY, the CSA shall be signed
between Oracle/SCEL and LUCKY. The CSA will replace this MOU. The CSA shall be a binding document
between Oracle/SCEL and LUCKY.
- The representatives of Oracle and LUCKY shall meet at regular intervals to discuss the
progress of the Oracle/SCEL Work Programme and also to set out a time-table for signing the CSA.
This would likely be after the certification by Oracle/SCEL of the quality of coal they would be
able to supply after treatment and acceptable to LUCKY at economical terms and conditions.
Shahrukh Khan, Chairman commented:
"Entering a partnership with LUCKY, a major cement manufacturer in Pakistan, further secures our
objective of becoming a leading supplier of coal in the country.
"In addition to our primary objective of supplying coal to the power generation market in
Pakistan, Oracle is also keen to supply local industry, particularly the cement industry. We
believe this will return significant value to shareholders and, most importantly, generate early
cashflows. We will be working with LUCKY in the coming months to share information on coal
quality, the mine development plans and transportation logistics for the purpose of entering a
Coal Supply Agreement (CSA). The CSA will add impetus to the development of our coal mine and
allows Oracle to supply competitively priced coal to LUCKY while the power plant is being
developed.
"There is significant demand for coal from cement manufacturers in Pakistan. Currently, the major
manufacturers import coal at international prices. As a result, a number of these cement
manufacturers are keen to switch to domestic coal supplies and are prepared to enter long term
supply agreements.
"In spite of the current socio-economic and political environment in Pakistan, Oracle remains
focused on its goal of developing a major coal mining operation. Last month, the Company entered
into an MOU with Karachi Electric Supply Company (KESC), a major local power utility, with the aim
of establishing a Joint Development Agreement for the development of a mine mouth power plant, and
has now concluded an agreement with LUCKY, a major domestic cement manufacturer. By so doing,
Oracle has secured a relationship with well established local companies that have long term
strategies based on sustainable development which therefore require secure long-term supplies of
coal. We are continuously de-risking our business with the aim of fast-tracking the development of
the Thar coal mine and generating early cashflow."
January 11, 2010
The Directors of Oracle are responsible for the contents of this announcement.
ENQUIRIES:
Oracle Coalfields PLC
Shahrukh Khan, Chairman
Telephone: +44 (0) 1366500722
Email: s.khan@oraclecoalfields.com
St Helens Capital Partners LLP
Duncan Vasey or Mark Anwyl
Telephone: +44 (0) 20 7368 6959
Lothbury Financial
Michael Padley / Ron Marshman
Telephone: +44 (0) 20 7011 9411
Email: michael.padley@lothburyfinancial.com
WEBSITE: www.oraclecoalfields.com
About Oracle:
Oracle Coalfields plc is a UK-based resource exploration and development company with an 80 per
cent owned subsidiary (Sindh Carbon Energy Limited) operating in Pakistan. The Company's shares
are quoted on the PLUS markets (symbol: ORCP). The Company's flagship project is the Block VI
coal project which is located on the Thar coalfield in the eastern Sindh province, Pakistan.
Block VI is host to a JORC compliant resource of 1.4 billion tonnes of lignite coal including 371
million tonnes in the proven category.
The Company also owns the Indus East coal project in Pakistan. A pre-feasibility study carried
out by Dargo Associates confirmed an inferred resource for the area (in line with the JORC Code)
of 365 million tonnes, of which the boreholes KHW-1 and KHW-2 give an indicated resource of approx
24 million tonnes.
Oracle Coalfields plc
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