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FIRST DYNASTY MINES LTD
9th Floor, 200 Burrard StreetVancouver, BC, CANADA V6C 3L6 Tel: +1 604 688-7166 * Fax: +1 604 687-2060 E-mail: nina@ivancorp.com |
PRESS RELEASE
Symbol: TSE:FDM
SINGAPORE, March 7 - First Dynasty Mines Ltd. announced today that it has agreed to sell its wholly-owned subsidiary, Energy Process Services (EPS), to Australian Oilfields Pty. Ltd. EPS is the 80% shareholder of Genindo EPS, which operates the Sembakung oilfield in Kalimantan, Indonesia. The terms of the sale provide for the payment to First Dynasty of cash, or cash plus shares, of US$40 million, plus reimbursement of working capital and the sale of a drill rig for an expected additional US$10 million. The amount of working capital will be adjusted at closing.
First Dynasty acquired EPS in March, 1995, for 14.7 million shares in First Dynasty, plus US$5.0 million in cash. The acquisition was viewed as strategic, in the sense that it brought in Indonesian investors as significant shareholders in First Dynasty. While management's stated intention was that gold and copper properties in Asia were First Dynasty's long-term focus, the company acquired EPS to complement its asset base with a property that had the potential for nearer term cash flow than the mineral exploration properties then being evaluated.
First Dynasty's plan for Sembakung at the time of the acquisition was to increase production at the oilfield from the then current production rate of 2,800 barrels of oil per day (BOPD) to 14,000 BOPD by recapitalizing the field and then entering into a secondary recovery program using water-flood technology. Oil production was successfully increased to 4,300 BOPD by March, 1996. Attaining this increased production required cash injections of US$27 million by First Dynasty. The planned, second stage of the expansion program will require substantial additional investment for wellfield drilling and waterflooding to increase production to 14,000 BOPD.
However, the desired return on the investment has not been realized to this date. First Dynasty's efforts to effectively operate the project with local management have been more difficult than anticipated and this has resulted in a delay of at least a year in implementing the expansion program and in realizing near-term cashflow objectives. It has now become apparent that cashflows generated by the expansion project are no longer necessary to explore, acquire or develop projects in First Dynasty's core business of gold mining. A sale now is considered attractive as it will free up cash and management attention for core business opportunities. These opportunities include development of a 6.3-million-ounce, multistage gold project in Armenia and an expanded exploration program in Indonesia, both of which were announced last month.
Management has therefore determined that the value of EPS can best be captured by a company such as Australian Oilfields, whose core business is oil and gas and which is active in Indonesia. The sale of EPS is expected to result in a book loss of approximately US$10 million.
First Dynasty's agreement allows Australian Oilfields to elect to pay the US$40 million purchase price as either US$30 million in cash plus 5.4 million common shares of Australian Oilfields, or US$40 million in cash. Australian Oilfields Property is listed on the Vancouver Stock Exchange under the symbol OZ. Closing of the transaction is expected by May 31 and is subject to execution of definitive documentation, completion of due diligence, closing adjustments, and receipt of all necessary regulatory, stock exchange and other approvals.
For further information:
Investor relations inquiries, Nina Tarmohamed, (604) 685-8382
ROBERTSON INFO-DATA Inc.,
Suite 640, 580 Hornby Street, Vancouver BC, CANADA V6C 3B6
Tel: +1 604 683-2037 - Fax: +1 604 681-4166 - E-mail: infodata@info-mine.com