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LONDON (Alliance News) - Falcon Oil & Gas Ltd Friday said its Australian subsidiary will buy a 4% overriding royalty interest in exploration permits on its Beetaloo Basin lands from CR Innovations AG, a move it hopes will help further its ongoing farm-out talks.
It will pay USD999,000 initially, followed by a second payment of the same amount once the farm-out deal is completed, to acquire the first 3% of the royalty interest. It then has a five-year call option to buy the other 1% for USD5 million.
Falcon will cancel the overriding royalty interests it buys.
"We are delighted to have negotiated this reduction in the Overriding Royalty on our Australian assets. This transaction should help to further progress our farm-out negotiations, which are at an advanced stage," Falcon Chief Executive Philip O'Quigley said in a statement.
The Australian unit holds four exploration permits covering seven million acres in the Beetaloo Basin in Australia's Northern Territory. Overriding royalty interests cover 12% of the total interest in the permits. They entitle their owners to earn 12% of the gross well head proceeds of any future production.
The balance of the royalty interests are held by a small number of families, mainly based in the US. The royalty interests were created between 2006 and 2008 when the exploration permits were sold by the original owners.
Falcon shares were up 9.2% at 12.97 pence Friday, one of the biggest gainers on AIM.
By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
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