Rey Resources to sell coal project for $21 million

THE BOURSE WHISPERER: Rey Resources (ASX: REY) has entered into an agreement with Crystal Yield Investments Limited, to sell the Duchess Paradise coal project in Western Australia.

The deal will be done via a staged acquisition by Crystal of all of the issued shares in Blackfin Pty Ltd, a wholly owned subsidiary of Rey.

Rey currently holds a 100 per cent interest in the Duchess Paradise project assets through Blackfin and its othe subsidiary company, Rey Derby Pty Ltd.

The Duchess Paradise assets consists four exploration licences over the Duchess Paradise resource E04/1519, E04/1770, E04/1753, E04/1386; mining licence application M04/453; miscellaneous licence application L04/58; a sublease with the Shire of Derby/West Kimberley at the Port of Derby; and facilities and equipment located at the Port of Derby.

“A period of challenging conditions in international coal markets has led us to emphasise a strategy of developing our oil and gas prospects, particularly the acquisition in March this year of a further 15 per cent interest in two key Exploration Permits in the Canning Basin, bringing our total interest in the two leases to 25 per cent,” Rey Resources managing director Kevin Wilson said in the company’s announcement to the Australian securities Exchange.

“While we also intend to continue the development of our coal exploration assets in the Canning Basin, during this period of sustained lower thermal coal prices, we believe the best interest of shareholders is served by this transaction.”

Rey indicated that on completion of the transaction, it will continue to hold interests in a number of coal exploration licences as well as petroleum exploration permits, all in the Canning Basin, Western Australia.

The company said it would continue to focus on exploring for and developing energy resources in north-western Western Australia, including its petroleum interests and remaining coal exploration assets.

Rey anticipates to record a book loss of $480,000 on the transaction (assuming the full payment of the three consideration payments totalling $21 million) and anticipated exploration expenditure will be reduced by approximately $2 million over the next 12 month as a result of the Transaction.

Crystal is a private investment company incorporated and based in Hong Kong.