GCM Resources signs framework agreement with NFC

The AIM-traded firm said the agreement related to its 572 million tonne high-grade coal resources at the Phulbari Coal and Power Project in north west Bangladesh.

Under the agreement, the parties had agreed to establish a joint venture entity, which would be responsible for progressing and implementing the framework agreement.

GCM and NFC would meet on a regular basis to discuss and arrange works relating to the project, including, but not limited to, the definitive feasibility study and financing.

It said it was intended that NFC would acquire an interest of 5% of the joint venture entity from GCM, based on a valuation of the project to be agreed upon with GCM or its affiliate or investment partner holding the balance of ownership of the project.

NFC would arrange financing for the project on acceptable, market-equivalent terms, and would in principle be appointed as the exclusive engineering, procurement, construction and commissioning (EPC) contractor for the project, with the parties to conclude a separate EPC framework agreement in due course.

The parties also agreed to enter into a joint development agreement regarding the next step works for developing the project.

GCM said it was currently in negotiations with PowerChina, with the intention to include PowerChina as a party to the framework agreement.

It added that “significant progress” had already been made with NFC and PowerChina under the existing memorandum of understanding, and that the framework agreement would enable it to continue towards the formation of a strategic partnership to jointly develop the project.

“Whilst the Covid-19 pandemic has delayed our progress with the project, we believe that it has encouraged the government of Bangladesh to review and enhance its energy security by utilising local fuel sources, following supply and importation disruptions,” said executive chairman Datuk Michael Tang.

“This supports our strategy to become an impact project for the people of Bangladesh, providing low cost and sustainable electricity in-country, by combining the company's coal mine proposal with mine mouth power plants generating 6,000MW.

“We are also pleased to report that a large part of the process towards finalising our strategic partnership with NFC and PowerChina has been completed.”

Both NFC and PowerChina were “highly respected” global companies, Tang said, and in becoming strategic partners to the project, they were expected to add “tremendous strength and credibility” to the proposal.

At 1032 BST, shares in GCM Resources were up 80% at 18p.