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During 2008, the definitive agreements signed with I-Comox Coal Inc., a wholly owned subsidiary of ITOCHU Corporation and LG International Investments ( Canada) Ltd., a wholly owned subsidiary of LG International Corporation (the “Parties”) provided for the creation of a new joint venture named the Comox Joint Venture to investigate the possibilities of developing the Raven Underground Coal Project located 80 km northwest of Nanaimo, BC. Under the terms of the agreement the Company and the Parties planned to formed a joint venture with the Parties funding a total of $11.25 million including: a) a lump sum payment to West Fraser Mills to complete the purchase of approximately 29,000 hectares of WFM’s freehold coal mineral and gas interests on the east side of Vancouver Island, which was completed prior to year end 2008; b) a refund to the Company for two prior option payments made to WFM; and c) a lump sum payment of $7.0 million to the Comox Joint Venture to fund all of the activities necessary to reach a production decision on the Raven Underground Coal Project. Through these funding payments, the Parties will earn a 40% interest in the undersurface rights excluding gas interests, and a 40% interest in the Company’s crown coal licences at the Bear and Raven Underground Coal Projects (collectively the “Comox Basin Holdings”). Under the terms of the agreement with WFM, the Vancouver Island properties are subject to a $0.50 per tonne royalty once production is achieved up to a maximum of $4,000,000. These future royalty payments are the responsibility of the joint venture.
The Comox Joint Venture (“CJV”) agreement also included a term sheet that provides that Compliance act as Manager and Operator of any joint venture mining project located with the Comox Coal Basin and that the Parties have exclusive global and marketing right to sell coal from the Comox Coal Basin.
During 2008 the Parties placed in escrow a total of $10.65 million to satisfy the definitive agreement requirements outlined above. As at March 31, 2009, a total of $600,000 remained in escrow and a majority of the freehold coal and mineral rights have been transferred into the names of the joint venture partners.
ITOCHU CORPORATION & LG INTERNATIONAL
ITOCHU Corporation is a major Japanese trading house and, among other things, has extensive experience in the development of coal mines and the marketing and sale of coal globally and has investments in coal mines in Australia and Indonesia. ITOCHU had annual revenues of $29 billion US and Net Income of $2.2 billion in the fiscal year ended March 2008. LG International Corp. is a leading general trader in Korea with a worldwide overseas branch network and has abundant experience in coal mining development and the marketing and sales of coal worldwide. LG International Corp. has annual revenues of $5.8 billion US and investments in coal mines in Russia, Australia, and Indonesia.
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