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  • International Coal Adds Surat Basin Coal To Its Growing Portfolio 0 comments
    Nov 21, 2012 6:14 PM

    International Coal (ASX:ICX) has added the Surat Basin to its growing suite of Queensland coal assets with an agreement to farm-in to 43 blocks or 132 km2 in the Surat Basin from Coal Face Resources Pty Ltd.

    The Surat Basin is known to produce high quality, low ash, high yield thermal coals at open cut depths.

    Bullishly, ICX may be able to quickly define a JORC Inferred Resource in early 2013, from a small drill program.

    This is based on significant nearby coal intersections.

    A term sheet has been signed for an inital 20% interest in the tenement. ICX can move to 71% in granted tenure (EPC 2286) spending $700,000.

    Significantly, the blocks are adjacent to Aquila Resources Pty Ltd's 345.1 million tonne JORC Resource at the Bendoba tenement (EPC 1190) in its Injune Thermal Coal Project.

    They are also located just 80 kilometres north-west of Roma in southern Queensland.

    A primary Exploration Target of up to 435 million tonnes of thermal coal is estimated in the Walloon Coal Measures comprising both the Juandah Coal Measures and the Taroom Coal Measures.

    Coal-bearing units were found to reside near surface with significant tonnages (up to 210Mt) modelled at depths less than 100 metres.

    Nearby raw coal quality results indicate potential for a high quality thermal coal product running between 5000 to 6700 kCal/kg (ad) with low ash at 5-20%.

    Agreement in detail

    The Don Juan project comprises a 43 sub-block granted EPC located approximately 80 kilometres north-west of Roma and 110 kilometres to the west of the Xtrata Coal Queensland Pty Ltd's WandoanCoal Project.

    The nearest rail line is at Roma with the nearest coal haulage point to the east near Miles (where a rail expansion is proposed linking Miles to the proposed Wiggins Island Coal Export Terminal at Gladstone).

    Don Juan Project Geology

    The Jurassic Walloon Coal Measures are the primary target for exploration with the overlying Springbok Sandstone offering a small secondary target. The Walloon Coal Measures contain the Juandah Coal Measures and Taroom Coal Measures with a sandstone dominated unit (the Tangalooma Sandstone) splitting the two coal-dominated units.

    The Walloon Coal Measures in the region of the tenement contain up to 24 seams.

    Walloon Coal Measure seams occur at shallow depths within the tenement area with modelling indicating significant cumulative coal intersections near surface and within opencut mineable depths.

    Coal intersections from holes close to the tenement boundary were modelled to extend into the eastern portion of the tenement with a modelled average cumulative thickness of up to 9.5 metres.

    The eastern flank of the tenement also offers the most accessible ground and the shallowest seams with strata dipping gently in a south-westerly direction.

    Nearby raw coal quality results indicate potential for a high quality thermal coal product running between 5000 to 6700 kCal/kg (ad) with low ash at 5-20%.

    The nearby Bendoba deposit is reported to have yielded average raw calorific values of 6352 kcal/kg (adb).

    On the 4th May 2012, Aquila reported an Inferred Resource of 345.1 Mt and Indicated Resource of 15.8 million tonnes from their Bendoba tenement (EPC 1190) with the JORC resource masks truncated by the eastern edge of Don Juan tenement area.

    Don Juan Project Exploration Target Tonnages

    An Exploration Target for the Don Juan Project has been assessed at 20 - 435 Mt for the Walloon Coal Measures with a potential secondary target in the Springbok Sandstone.

    These tonnages were estimated from structural modelling completed using historical boreholes and market releases of regional miners and developers.

    Farm in structure and terms of the deal

    The terms of the JV / Farm in agreement offer ICX the opportunity to earn up to 71% of the Don Juan Project within 2 years from the commencement of the JV.

    This is based on the following milestones:

    - A 20% initial interest upon the issue of 3,000,000 ordinary shares in ICX
    - Following the expenditure of $250,000 in exploring and developing the tenure in the next 12 months (Phase 1), ICX's share in the project shall increase to 46%
    - Following the further expenditure of an additional $450,000 in the 12 month period following Phase 1 (now referred to as the Phase 2 development period), ICX's share in the project shall increase from 46% to 71%.
    - ICX shall issue an additional 3,000,000 ordinary shares to Coal Face Resources Pty Ltd
    at the completion of each of Phase 1 and Phase 2.
    - A total of 9,000,000 shares shall be issued from the initial interest to the conclusion of Phase 2.

    Analysis

    ICX's portfolio of Queensland's coal producing provinces now includes interests in the Bowen, Galilee, Surat, Eromanga, and Maryborough Basins.

    The Surat Basin sub blocks appear particularly appealing given the propensity of the Basin to produce high quality, low ash, high yield thermal coals at open cut depths.

    Coal intersections from holes close to the tenement boundary were modelled to extend into the eastern portion of the tenement with a modelled average cumulative thickness of up to 9.5 metres which is a good sign.

    With an Exploration Target of up to 435 million tonnes of thermal coal and ability to define a JORC Resource in early 2013 adds a near term share price upside target.

    ICX has leveraged the weakness in the coal sector to acquire acreage in key coal regions in Queensland at relatively lower valuations.

    International Coal has signs of an emerging coal house in the making. Proactive Investors maintains the current share price of $0.12 does not reflect the value inherent in its coal assets, nor exploration potential. We could foresee a price closer to $0.20-$0.30 in 2013.

    Proactive Investors is a market leader in the investment news space, providing ASX "Small and Mid-cap" company news, research reports, StockTube videos and One2One Investor Forums.

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