Significantly, the Consuelo Project tenements to be acquired are located just 10 to 20 kilometres from Xstrata's open pit high grade thermal coal mine at Rolleston - one of the lowest cost operating open pit mines in Australia.
The signing of the deed of variation provides a greater certainty as to the overall tenure and security that make up the joint venture agreement.
Under the revised terms, International Coal now only has to issue 15 million shares and 10 million options upon the grant of the tenements compared to the original agreement which provided for the issue of 17 million shares and 10 million options.
As per the original agreement, the company has already paid Coal Face an initial $100,000 and issued 2 million shares.
On completion of the revised issue of shares International Coal will receive its 20% interest in the project tenements.
Strategically located Consuelo Projects
The Consuelo Project tenements are within the well-known and defined region of the Southern Bowen Basin.
The tenements are 10 to 20 kilometres southeast of the existing Xstrata Rolleston open pit high grade thermal coal mine and only 26 kilometres from the rail haulage line that runs adjacent to the Rolleston mine.
The existing rail line currently services the Barney Point Coal terminal, the RG Tanna Coal terminal and the proposed Wiggins Island Coal terminal.
Endocoal's Meteor Downs South deposit is around 30 kilometres to the northwest of the tenements.
Geology of the Consuelo Project
The Consuelo Projects are all within close proximity of one another in a well-defined area of the Bowen Basin.
Modelling indicates the Consuelo Project could host significant mineable open cut and underground tonnages.
Coal quality is exceptionally high - average raw ash content ranges from 8% to 30% with moisture 3% to 8%.
Washability studies and clean composite by Bandanna Energy in the neighbouring Arcadia Project have provided evidence that the Bandanna seams could make a semi-soft metallurgical coal with a swell of 2.4 to 4 likely.
An exploration target of 800 million tonnes to 1.7 billion tonnes has been outlined for the project.
Farm in structure
The terms of the farm in remain unchanged and these are:
- A 20% interest upon the issue of 2 million shares and then, following the grant of tenements, the issue of 15 million shares in International Coal and 10 million options exercisable at $0.20 and valid for five years, and a payment of $100,000 to Coal Face shareholders;
- Following the expenditure of $2.5 million on project development - phase one - over the 18 months after the grant of the tenements, International Coal's share in the project will increase to 46%;
- Following expenditure of an additional $3.5 million in the 18 month period following phase one, now referred to as the phase two development period, International Coal's share in the project will increase 71%;
- At the conclusion of the phase two development period, International Coal will issue an additional 8 million shares to Coal Face and pay $500,000; and
- ICX reserves the right to assign part of its interest in the joint venture if it deems this appropriate to develop the project.
The signing of the term sheet re-inforces the potential of the Consuelo project given the proximity to Xstrata's Rolleston open pit high grade thermal coal mine and proximity to a rail haulage line.
ICX can develop Consuelo projects and earn an interest of 71% following completion of the farm in phases.
Modelling also indicates the Consuelo project could host significant mineable open cut and underground tonnages.
Coal quality looks to be exceptionally high - average raw ash content ranges from 8% - 30% with moisture 3% - 8%.
ICX has built a suite of coal projects at: South Blackall; the Bundaberg region (in its JV arrangement with Hancock Prospecting subsidiary Queensland Coal Investments Pty Ltd) and now its exposure to a package of high grade thermal coal and semi-soft coking coal tenements in the South Bowen Basin region.
The current share price of ICX of $0.105 looks oversold.
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