Straits Asia Resources is acquiring mining, exploration and offtake rights to two coal mining areas to the north of its existing operations on Sebuku Island, Indonesia.

The acquisition is subject to final due diligence and the consideration payable is US$25 million cash on completion. An additional contingent payment of approximately US$114 million will be made upon satisfaction of additional conditions which include obtaining relevant Indonesian government approval to re-classify certain areas within the mining concession and obtaining relevant approvals to start mining activities within the area.

The two areas contain coal deposits that lie in unmined areas immediately adjoining the Group’s Coal Contract of Work (CCOW), and extending 6km northwards. Two independent reviews of the deposits utilizing drilling conducted between 2003 and 2005 have identified approximate known resources of between 34 and 50 million tonnes.

Straits Asia will immediately embark on an extensive exploration programme on the new areas in order to prove up the resource base to JORC standards.

Straits Asia CEO Richard Ong says: “Having access to these deposits, which are of similar quality to our Sebuku coal, is very beneficial to Straits Asia which has the infrastructure in place on Sebuku Island to exploit these deposits. It also helps to consolidate the group’s exclusive mining position on Sebuku Island, giving it significantly greater flexibility in the planning of its mining operations there.”

Straits Asia has identified approximately 4 million tonnes of coal available for mining immediately. From the reports of two independent technical reviews, significant additional resources will become available upon satisfaction of conditions precedent relating to the US$114m contingent payment, and beyond this, the outcome of an extensive drilling program across both areas.

Richard Ong says: “We are also confident that the coal can be mined at a similar cost as our existing operation, which is one of the lowest in the world. I am sure we will be able to achieve a major jump in our resource and reserve base after we have conducted an intensive drilling program. The acquisition offers further potential for growth beyond our goal of 6 million tonnes production in 2009.”

www.straitsasia.com