Polo Resources has executed an option deed dated March 30, 2009 with Peabody Energy pursuant to which Peabody may acquire a 50% interest in a joint venture formed to hold all of Polo’s coal and uranium assets in Mongolia. Pursuant to the option, Peabody would invest up to $25.8 million to receive a 50% interest in a joint venture entity to be formed with Polo in Mongolia, which is intended to be named Peabody-Polo Resources BV. The assets to be contributed to the joint venture include all of Polo’s coal, uranium and other mineral interests in Mongolia. Polo’s coal license portfolio includes a substantial number of licenses located in the South Gobi coal region which hosts some of the largest coking and thermal coal deposits in close proximity to China.
In addition, Peabody would be granted warrants to subscribe for up to about 15% of the fully-diluted share capital of Polo. The transaction is expected to close by the end of April 2009 following completion of definitive documentation. Over and above the Peabody investment, Polo will receive a 1% royalty from the Joint Venture for any coal mined and sold from properties contributed to the Joint Venture at closing or identified by Polo and acquired by the JV in the first 12 months of operation. Polo says that “given Peabody’s track record as the largest private-sector coal company in the world and its strategy to be primarily a producer the royalty could have substantial future value to Polo.”
Separately, in order to bolster Polo’s efforts in Mongolia and to ensure the best possible outcome for the Joint Venture, Polo is in the process of finalising an agreement with American Patriot International pursuant to which AmPat will represent Polo’s interests in the operation of the Joint Venture on a performance fee basis.
Neil Herbert, Executive Deputy Chairman, said: “We are most enthusiastic to be entering a 50-50 joint venture on our Mongolian coal mining and exploration interests with the world’s largest private-sector coal company Peabody Energy. Under the agreement, Peabody’s cash contribution to the joint venture should be sufficient to fund at least the next two years of operations. The agreement provides Polo the further opportunity to benefit financially from the disposal of certain non-core interests. The investment by Peabody and the potential value which may be realised by Polo from these non-core disposals will potentially deliver in excess of $50 million of value to Polo in total. We believe the combination of our existing resources in Mongolia with the resources and commitment of Peabody provides the maximum potential to develop and unlock the potential value of the Mongolian interests for the joint venture partners. Polo is also in discussions with American Patriot Energy, a successful coal mining group, to manage certain of its coal interests allowing Polo’s management team to increase its focus on the development of the group’s uranium interests.”
Polo is an emerging energy company focused on acquiring and developing advanced stage coal and uranium properties. www.poloresources.com.