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Wednesday, January 29, 2014
Simba Energy signed an exclusive Letter of Intent (LoI) to farm out its PSC for Blocks 1 and 2 onshore Guinea with an unnamed private investor group out of Canada. The investor group can earn up to a 45% interest in Simba’s Guinea PSC with a total investment of $6,500,000.
The investor group includes some participants from a group that recently signed the Kenya farm-out LoI with Simba earlier this year.
The principal commercial terms of the LoI have Simba receiving $700,000 after execution for cost recovery. The investor group is also committed to spend $3.8 million on a FTG survey covering a minimum of 9,000 sq km upon the completion of the definitive agreements.
This total initial expenditure of $4.5 million will earn the investor group a 25% interest in Simba’s Guinea PSC. There is an option to earn an additional 20% interest by carrying out a 2D seismic program with a minimum expenditure of $2 million to bring the blocks to drill ready status.
Upon completion and interpretation of seismic results, both parties mutually agree to either drill a first exploration well, with each party responsible for its own share of costs, or; to farm out the project to other third parties on mutually acceptable terms.
Robert Dinning, President & CEO of Simba, stated, “This LoI provides immediate recovery of expenses to Simba and accelerates the completion of an FTG airborne survey. The LoI also provides the investor group with an option to carry out additional seismic surveys to support the selection of specific drill targets in Guinea. The $700,000 payment allows Simba to recover a portion of its costs incurred in Guinea to date. This LoI and the pending definitive agreement allows the Guinea project to advance while Simba and its shareholders retain significant interests in Blocks 1 & 2. These blocks are highly prospective given the exploration work completed to date by the Company and should provide Simba with drill ready targets later this year. It is expected that the definitive agreement(s) will replace the LoI before the end of Q1 2014.”
Simba is off to a very positive start in 2014. Simba has now signed farm out LoIs for its Kenya and Guinea PSCs worth an estimated $15.1 million in total, and its management team is working to sign further LoIs to farm out additional PSCs in H1 2014.
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