Pan Asia Corporation Limited: Update On Acquisition Of Innovation West Pty Ltd

10:12 AEST Sept 6, 2010 ABN Newswire (C) 2004-2010 Asia Business News PL. All Rights Reserved.

Perth, Australia (ABN Newswire) - Further to the previous announcements made by Pan Asia Corporation Limited (ASX:PZC) (Pan Asia or the Company), the Company provides the following information by way of update regarding Pan Asia's proposed acquisition of an interest in certain coal projects in Indonesia through the purchase of all of the issued capital of Innovation West Pty Ltd (Innovation West or IW) (Acquisition).

1. Innovation West

As previously announced, Innovation West is an Australian company which has an interest in a number of coal projects in Indonesia. Upon completion of the Acquisition of Innovation West, the Company will acquire a significant and balanced package of coal assets. Details of the asset package and key commercial points are summarised in this release.

Pan Asia's Board and management are very enthusiastic as to the quality and prospectivity of these interests and are committed to completing the Acquisition as soon as is practicable.

The projects being acquired provide:

- Immediate cashflow via a financing provided for the expansion of production (Nadvara)

- A flagship project that is in pre-development stage (TCM)

- A flagship exploration project (BCKP / SIM)

- A number of exploration projects & a pipeline of additional project opportunities

The Company believes this combination of assets provides the Company with the platform to achieve its initial goal of becoming a significant supplier of competitively priced energy to Asia.

The projects that Pan Asia gains access to via the Acquisition of Innovation West are detailed in Attachment A (see link at the bottom of the release) but are over-viewed below:

Immediate Cashflow Project -Financing Provided for Expansion of Production - Thermal Coal, East Kalimantan

i. Nadvara ('NAD') - financing and offtake rights

- Current production ramping up to 1.2 Mt per annum & then 1.8Mt per annum.

- Calorific Value averages 5,300 kcal / kg (adb).

- Excellent location with haulage road, stockyard and conveyor loading jetty all operational.

- JORC reserve of 5.84 Mt and Measured and Indicated resource of 19.63 Mt with additional potential.

- USD 5 M advance already provided for expansion of production, repayable to IW from production plus royalty.

- Offtake rights - first 4.8 million tonnes of coal sold to Noble Resources ('Noble') (ASX:NMG).

Flagship Project - Pre Development - Thermal Coal, South Kalimantan

i. Transcoal Minergy ('TCM') - 75% interest

- Targeting long life underground operations

- Possible initial open pit.

- Calorific Value of ~6,500 - 6,800+ kcal / kg (adb).

- Maiden JORC resource of 19.75Mt (Indicated) and 11Mt (Inferred).

- Additional drilling now targeting 50Mt to 60Mt Exploration Target1.

- MOA's signed with significant international underground coal mining groups with existing operations in Indonesia.

Flagship Exploration Project - Thermal Coal, East Kalimantan

i. Baramega Citra Kutim Permai and Surya Ibrahim ('BCKP & SIM') - right to earn a 50% interest

- 32,307 Ha with coal outcrops of significant thickness.

- Calorific Value expected between ~5,400-5,800 kcal / kg (adb).Historic exploration with 27 holes drilled.

- Initial exploration target of 50 to 70 Mt.

Exploration Projects - Thermal Coal - East Kalimantan except where stated

i. Jaya Kanigara ('JK') - 80% interest South Sumatra

- 4,500 Ha concession, highly prospective for large coal deposits.

- Initial Exploration target of 10 to 20 Mt.

- Ratu Ayu ('RAY') - right to earn a 50% interest

- 1,508 Ha adjacent to concessions hosting large tonnage of coal

- Potential to form part of large regional project

- Exploration target of 10 to 15 Mt.

Project Pipeline

i. Perdana Maju Utama ('PMU') - Financing & offtake rights

- Right to offtake a portion of production via a pre-financing.

- Possible Q4 2010 development.

- Calorific Value of ~5,200 - 5,700 kcal / kg (adb).

ii. 3,177 Ha + with coal outcrop identified over 6 km of strike length.

- Calorific Value expected between ~4,800-5,800 kcal / kg (adb).

- Potential to form part of large regional project in Bengalon area

- Exploration target of 20 to 30 Mt.

- The upgraded asset portfolio has been negotiated by IW with various Indonesian groups, one of which is led by Mr Honardy Boentario (proposed director of Pan Asia as IW nominee upon completion of Acquisition). Under the agreement with Mr Honardy Boentario, IW also has rights to additional coal projects held and being acquired by Mr Honardy Boentario located in East Kalimantan and the Berau coal producing area.

Offtake Rights

i. Offtake rights for production from NAD, PMU, BCKP & SIM and RAY.

A key part of the Company's strategy is to acquire the offtake rights of projects in which it is involved. To this end, it has formed a relationship with Rockfield Resources as an adviser in the handling of these offtakes. The first completed offtake for 4.8 million tonnes of coal from Nadvara with Noble was recently announced (refer ASX announcement 23 August 2010).

Pursuant to this arrangement, IW has entered into a coal purchase agreement with Noble, with coal deliveries to commence September 2010. Noble has provided finance of A$2 million to IW and Pan Asia has agreed to provide a corporate guarantee to Noble in connection with this financing.

A thorough legal due diligence process over the major rights being acquired (NAD and TCM) has been completed and is in the final stages of completion on the secondary assets. The the due diligence for acquiring IW has been satisfied as the Board considers the major rights (NAD and TCM) being acquired are more than sufficient to proceed with the Acquisition. The Company is well advanced now with the preparation of the Notice of General Meeting for seeking shareholder approval for the Acquisition of IW (refer section 5 of this update for indicative timing).

2. Confirmation of Terms of the Acquisition

As previously advised, the material terms of the Acquisition are as follows:

(a) Pan Asia will acquire all of the above-mentioned interests by purchasing all of the issued capital of Innovation West.

(b) The consideration to be paid to the vendors of Innovation West (Vendors) will be 655,000,000 fully paid ordinary shares in the capital of Pan Asia (noting that 25,000,000 performance shares were initially provided for with a performance hurdle to conversion which has now been achieved upon the signing of the off-take agreement with Noble Resources. These will now be issued as fully paid ordinary shares).

(c) Pan Asia will reimburse Innovation West for all expenses incurred in relation to Innovation West's own legal, financial and technical due diligence enquiries in respect of the coal projects which it has acquired an interest in.

(d) Pan Asia has agreed to make loans available to Innovation West to assist Innovation West secure the rights in relation to the coal projects. These loans are to be repaid by Innovation West.

(e) The Vendors will be entitled to nominate 2 new members to the Board of Pan Asia.

(f) Completion of the Acquisition is subject to certain conditions (usually seen in these type of acquisitions), the key condition being the Company obtaining all necessary shareholder and other approvals for the Acquisition pursuant to the Corporations Act and the ASX Listing Rules.

3. Confirmation of ASX Requirements

ASX has confirmed that in order for Pan Asia to complete the Acquisition, it will be required to obtain shareholder approval for the change of nature and scale of Pan Asia's activities arising from the Acquisition in accordance with Listing Rule 11.1.2 and comply with Chapters 1 and 2 of the Listing Rules, as if Pan Asia was applying to admission to the official list of ASX.

If shareholders approve the Acquisition, trading in Pan Asia's securities will be suspended from the date of the shareholder meeting until such time as Pan Asia has complied with the applicable Listing Rules (including execution and delivery of any applicable Vendor escrow agreements). Pan Asia will endeavour to have these requirements satisfied shortly after the shareholder meeting.

4. Consolidation, Capital Raising and Proforma Balance Sheet

Shareholders should also note that Pan Asia will need to consolidate its capital for the purposes of re-compliance with Chapters 1 and 2 of the ASX Listing Rules, namely the requirement to have its shares quoted at the required listing admission price. The final ratio for the consolidation is currently under consideration by Pan Asia and will be advised in due course. Outlined below is the capital structure of Pan Asia assuming completion of the Acquisition and a consolidation on a 20 for 1 basis (noting actual final consolidation ratio will be set at the appropriate time):

Ordinary shares
Current shares on issue              1,228,460,832
Post consolidation 20:1                 61,423,042

Acquisition consideration               32,750,000
Proposed maximum capital raising         5,000,000(1)
Total ordinary shares on issue        99,173,042 2(2)

Performance shares
Current performance shares on issue    150,000,000
Post consolidation 20:1                  7,500,000

Acquisition consideration                        0
Total performance shares on issue        7,500,000

Options
Current options on issue               315,552,485
Post consolidation 20:1                 15,777,625

Acquisition consideration                        0
Total options on issue                  15,777,625

Notes:

(1). It is noted that a capital raising on terms to be determined and pursuant to a Prospectus will occur concurrently with completion of the Acquisition. At present, it is anticipated that the Company will raise a maximum of A$1 million with a minimum subscription of A$200,000. The above assumes maximum capital raising.

(2). Assumes no further issue of shares in Pan Asia prior to implementation of the Acquisition, including no prior conversion of performance shares or options currently on issue.

Based on the above, the Vendors of Innovation West will in aggregate acquire approximately 33% of Pan Asia's issued share capital on an undiluted basis and approximately 27% on a fully diluted basis.

A proforma balance sheet of the Company assuming completion of the Acquisition is set out in Attachment B (see link at the bottom of the release).

5. Further information and Timing Update

To satisfy the ASX requirements as set out above, Pan Asia is currently finalising the preparation of a Notice of General Meeting (including an Independent Technical Report on Innovation West's coal interests in Indonesia) (Meeting Materials) for the purpose of seeking the shareholder approvals set out herein. These documents will contain further detailed disclosure regarding the Acquisition and Innovation West.

The anticipated timing for the release of these documents and other key events is set out in the indicative timetable below:

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Event                                          Anticipated Date*
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Dispatch of Meeting Materials to shareholders      22/09/2010
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Lodge Prospectus                                   04/10/2010
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Company's securities are suspended from quotation  27/10/2010
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General meeting of shareholders to approve the 
Acquisition                                        27/10/2010
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Complete capital raising and Acquisition           05/11/2010
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Company confirms with ASX that it has complied
with the Chapters 1 and 2 of the Listing Rules     10/11/2010
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Securities reinstated to quotation on ASX          12/11/2010
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* These dates are indicative only and are subject to adjustment by the Company.

Pan Asia is pleased that this Company transforming acquisition is now nearing completion and looks forward to a dynamic growth period for the Company based on the new assets being acquired.

For the complete Pan Asia announcement including Summary Of Coal Project Portfolio, please view the following link:
http://www.abnnewswire.net/media/en/docs/63653-ASX-PZC-504178.pdf


About Pan Asia Corporation Limited:

Pan Asia Corporation Limited (ASX:PZC) is a rapidly growing diversified resources company listed on the Australian Securities Exchange with offices in Perth, Australia and Jakarta, Indonesia.

The Company aims to be a major supplier of key resources into the expanding Asian markets and is well advanced in its due diligence and requirements for regulatory and shareholder approval for the acquisition of a number of significant coal and manganese assets in Indonesia. This diversified portfolio of assets includes projects in both production & exploration stages as well as a significant opportunity to participate in key infrastructure development which will complement the existing coal projects held by the Company.

The evaluation & development of the current suite of assets in addition to new opportunities that arise from a strong local partner network will be the foundation for Pan Asia's aim to become a top tier coal & manganese company in Indonesia over the next three years. An extensive international financial network provides support for the Company's rapid growth plans.



Contact:

Pan Asia Corporation Limited
Alan G. Hopkins, Chief Executive Officer
Tel: +61-8-9381-5819
http://www.panasiacorp.com.au