Lemur Resources (ASX: LMR) has received results from a further 23 core samples taken as part of the Western Drilling Program at its Imaloto Coal Project in Madagascar that shows coal contained in the Main Seam when washed generates a primary product yield of about 67% export grade thermal coal.
Importantly, the results of the fifth batch of samples correlates with previous phase three sample analysis, which has shown that the secondary product generated will be suitable feedstock for a domestic coal fired power station.
Therefore, assuming single stage processing, the overall theoretical yield is 100% for the entire Main Seam.
Meanwhile, wash table analyses of the Upper and Top seams indicate both seams have the potential to generate a product suitable for power station feedstock with yields of 74.3% and 80.9% respectively.
A Lower Seam, which lies below the Main Seam, was encountered for the first time during the recent Western Drilling Program.
While the Lower Seam is expected to add to the Imaloto Project's global resource, to date insufficient work has been undertaken for quantification.
Once the remaining seven samples are received within the next few weeks Lemur will be in a position to upgrade the current JORC Inferred resource, which will be closely followed by the release of results from the Scoping Studies currently nearing completion.
Blair Sergeant, managing director, commented on the positive results: "Results from the fifth batch of samples provides further confidence and evidence that Imaloto contains a quality product that would be highly sought after by the power generation markets of India and China.
"Despite recent volatility in the thermal coal price globally, the underlying supply and demand fundamentals of thermal coal remain favourable and therefore, the Imaloto Coal Project remains attractive.
"In addition, we are hopeful the results of the resource upgrade and scoping studies, both due for release imminently, will indicate solid project economics, further enhancing Imaloto's investment attractiveness".
Madagascar is ideally placed to export coal to India, which plans to expand its coal fired power generation capacity by about 60 gigawatts by 2013. India's supply shortfall is estimated at over 100 million tonnes by 2012.
The Imaloto Coal Project, which covers 81.5 square kilometres over five permits, is located in the Imaloto Coal Basin, the northern-most coal field in the greater Sakoa Basin of South West Madagascar.
It is located around 30 kilometres northwest of the Sakoa Basin, where coal mining has previously been carried out.
The project hosts an Inferred JORC Resource of 176 million tonnes of coal, with the phase three drilling program targeting an upgrade to the high confidence Measured category.
The geology in the region is similar to that of the Witbank coal field in South Africa and the Gondwana coal fields of India.
Outcropping coal measures extend for a distance of around 15 kilometres, immediately west of the north to south flowing Imaloto River.
Imaloto is favourably located near the existing port of Tulear and adjacent to the proposed Soalara Port, where infrastructure planning is underway to provide a mineral bulk handling export facility.
These latest laboratory results further confirm Lemur's Imaloto Coal Project contains a quality coal product that would be highly sought after by the power generation markets of India and China.
India's growing demand for power and large scale grid expansion is driving continued demand for imported thermal coal, and Madagascar is well located to capitalise on these opportunities.
Importantly, Lemur is also positioned to benefit from emerging domestic Malagasy development projects as a natural supplier of thermal coal and/or electrically to meet power demand.
There are a number of domestic mining and industrial operations planned which will require a ready supply of power, including Sherritt International's US$5 billion Ambatovy Nickel Project which will require circa 400,000 tonnes of coal to fire its 120 megawatt power plant.
Lemur is also aggressively working towards securing the first coal fired Independent Power Producer Licence in the area, in conjunction with the local electricity utility company Jirama. A Memorandum of Understanding was executed in September 2011.
The company is currently trading below cash backing, with a market cap. of A$13 million and cash in the bank at the end of the June 2012 quarter of $20.4 million. Downside given cash backing is minimal.
The imminent resource upgrade and results of Scoping Studies that could indicate solid project economics are likely to act as catalysts for re-rating. We believe that Lemur should move onto investor radars as its achieves these milestones. However, the current share price will not always be on offer given these catalysts and we would expect a re-rating would be in the offing for Lemur.
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