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Nusantara signs US$80M nonbinding funding deal for Indonesian gold project

Nusantara Resources Ltd. signed a nonbinding term sheet with PT. Indika Energy Tbk for up to US$80 million in funding for the Awak Mas gold project in Indonesia, with the facility expected to close in early 2020.

Under the terms, Indika Energy will invest up to US$40 million in Nusantara unit PT Masmindo DWI Area to secure up to 40% of the project. Indika Energy will spend US$15 million for an initial 25% stake and pay US$25 million to acquire an additional 15%.

In addition, Indika Energy unit PT Petrosea Tbk will be awarded the front-end engineering and design contract and the engineering, procurement and construction contract. As part of the deal, Petrosea will provide deferred payments of up to US$40 million.

Nusantara said Dec. 9 that it will invest US$10 million in the project to cancel a third-party royalty and fund exploration and other activities.

The company also agreed to issue 10 million share options to Indika, exercisable until Dec. 1, 2022, at 61 Australian cents apiece and another 10 million share options to Petrosea, exercisable until July 2022 and July 2024, at 45 cents each.

Nusantara and Indika Energy also intend to secure debt to cover 60% of the total project funding requirements, equivalent to about US$110 million to US$120 million.

Nusantara intends to reach a final investment decision and start construction in 2020, with commissioning targeted two years after. The deal is subject to a definitive agreement and shareholder approval, among other conditions.

An October 2012 definitive feasibility study on Awak Mas outlined a posttax net present value, discounted at 5%, of US$152 million, a 20.3% internal rate of return and a four-year payback period.