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HISTORY OF THE COMPANY In April 2005, Sino Prosper Resources Ltd. (SPRL), entered into a joint venture agreement with two Indonesians, Mr. Sayono and Mr. Hariono Moeliawan, to establish a joint venture company under the proposed name of "Sino Prosper Indocarbon Ltd." in Indonesia. SPRL is a subsidiary of Sino Prosper Holdings Ltd. (中盈控股有限公司), a Hong Kong Stock Exchange listed company initially engaged in the development of residential and commercial properties for sale and investment in Dalian (大連) city in Liaoning (遼寧省) Province of the PRC. Sino Prosper now focuses on investing in energy and resources related projects and mining. In addition, the Company also wholesales and distributes petroleum gas, liquefied natural gas and other petroleum products. In April 2005, the Ministry of National Development Planning Agency of Indonesia (BAPPENAS – Badan Perencanaan Pembangunan Nasional) issued a letter supporting the establishment of SIPINDO Ltd. for the investment of the bitumen extraction project at Buton Island, subject to compliance with the applicable laws and regulations in Indonesia. In May 2005, the Government of Buton Regency issued a letter expressing support for the establishment of SIPINDO Ltd., the fulfillment of the need of raw materials, and the acceleration of the development of bitumen extraction project at Buton Island. In June 2005, the "Foreign Investment Approval" issued by Investment Coordinating Board (BKPM – Badan Koordinasi Penanaman Modal) in Indonesia was obtained for SIPINDO Ltd. Still in June 2005, the Government of Muna Regency, where its territory covers northern part of Buton Island, issued a letter of support to SIPINDO Ltd. to obtain the "Principal Permit of General Surveillance Mining Right". In March 2005, SPRL and China National Machinery & Equipment Import and Export Corporation (CMEC – 中国机械设备进出口总公司) entered into an agreement pursuant to which CMEC will conduct the exploration and mining of the Buton Bitumen Mine. Upon the commission of the Buton Bitumen Mine, CMEC will be responsible for engineering, production and management of the mine and will be retained as the engineering procurement construction contractor for the project. In September 2005, SIPINDO Ltd. was granted the Exploration Right of the Buton Bitumen Mine for total area of 24,382 hectares. Upon compliance with the Indonesia laws and regulations, SIPINDO Ltd. shall have the right to explore and extract bitumen from the Buton Bitumen Mine for 30 years. Such right will be subjected to a renewal right for another 10 years upon expiry and another renewal right for a further 10 years upon expiry of the first renewal. The details of the licenses by which the Government of Muna Regency granted the Decision of General Reconnaissance Mining Right to SIPINDO Ltd. are as follows:
Total: 24,382 hectares According to the report issued by Bidang Wilayah Pertambangan dan Energi, a province level of government institution under Department of Energy and Mineral Resources, in respect of survey conducted for a total area of 369 hectares out of the above-mentioned area of 24,382 hectares in the Buton Bitumen Mine, it is estimated that a total asbuton reserves in such 369 hectares is around 120,500,000 cubic meters (i.e. about 204,000,000 metric tons). As estimated, the total asbuton reserves in the exploration area of 24,382 hectares is around 8 billion cubic meters (i.e. around 13.6 billion metric tons). On the assumption of 10% extraction rate, it is estimated that 1.2 billion metric tons of marine fuel oil and 136,000,000 metric tons of asphalt modifier could be extracted from such 24,382 hectares bitumen mine.
The project now has been
entrusted to Beijing Petrochemical Design Institute (BPDI It has recently become aware that a draft bill has been published in Indonesia with the proposal to separate the administration of several districts on Buton Island where the Buton Bitumen Mine is located, from Muna Regency to a new regency (the “New Regency”). It is not yet clear if and when the proposed law will be promulgated and become effective. According to the Company’s Indonesian legal advisers, there is no assurance that the New Regency will be established and in any event, this would not itself cause any mining right owned by the Joint Venture Company to be cancelled or otherwise invalidated even though the subject area thereof is located within the New Regency. If a New Regency is established, according to the Company’s Indonesian legal advisers, the Joint Venture Company may however be required to exchange the existing mining right for an identical mining right issued by the New Regency. The Company will issue further announcement(s) in relation to the Buton Bitumen Mine if and when appropriate. The Board is pleased to announce that the general exploration work on an area of 9,924 hectares (out of the Area) was completed in January 2006 by an Indonesian geology exploration team (the “Indonesian Team”). In addition, detailed exploration work on an area of 1,150 hectares within the aforesaid 9,924 hectares was commenced by the Indonesian Team. A preliminary report submitted on 7 August 2006 by the Indonesian Team to the Joint Venture Company indicates that there are estimated to be approximately 36 million tons of asphaltic rocks. A further detailed report is expected to be completed in September 2006 and if appropriate, the Company will make further announcement(s) in relation thereto. Upon completion of the detailed exploration work and upon compliance with all relevant laws and regulations, the Joint Venture Company may then proceed with exploitation work in those aforesaid 1,150 hectares of the Buton Bitumen Mine.
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