Indo Mines Limited has entered into an agreement for the acquisition of a 51% stake in Sapex Oil Tools Limited, a composite mat, downhole tools and location management business that services the mining and oil & gas industries in Indonesia.

Sapex has been operating since 1994 and services some of the largest mining and oil companies operating within Indonesia.

The total purchase price for the acquisition will be US$3 million which will be funded via US$1 million in cash from Indo Mines’ cash reserves and the remaining US$2 million through a 12% interest, 3-year non-recourse debt facility provided by Makati Capital Partners to Sapex.

The first tranche of US$1.5 million is payable upon completion of the acquisition of 51% of Sapex. The second tranche is payable upon satisfaction of certain conditions linked to the performance of the business.

Sapex is an established regional provider of the world’s leading composite mat system, which is designed for use in remote and challenging terrain-access locations. The company holds the licence to distribute the mat system within Indonesia, technical services capability, in-house developed downhole tools and three existing subcontracts to provide services.

Sapex also designs, supplies and installs specialized downhole drilling, completion and workover equipment across South East Asia to support the regional energy industry. The Sapex oil tools ‘completions product line’ includes the Sapex brand of production and service packers, completion accessories, flow control equipment, service tools, liner hangers, partner-manufactured external casing packers and float equipment.

A nominee of Indo Mines will sit on the board of Sapex, but Indo Mines’ intention is that the existing board and management will continue to run the business. Sapex’s strategy moving forward is to expand and diversify its existing capabilities, including targeting opportunities in the mining, construction, plantation, telecommunication and national security sectors across South East Asia.

Indo Mines chairman Peter Chambers said, “We are very pleased with the acquisition of Sapex Oil Tools. Sapex is a great business that will assist in the advancement of Indo Mines’ flagship Kulon Progo iron sands project by providing operational support, particularly through the use of the composite mats, as well as cash flows to assist in funding the ongoing development of Kulon Progo.”

ASX-listed Indo Mines continues to progress its Kulon Progo project, with the definitive feasibility study for the iron plant due in May 2016. Indo Mines is also focusing on developing supporting infrastructure for the smelter development in the allocated industrial zone, with design of a co-generation and power plant under way.