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International Coal Tightens Focus On Consuelo Coking Coal Project

International Coal (ASX: ICX) has taken further steps to focus its exploration expenditure on the promising Consuelo Project in the Bowen Basin, Queensland, with a deal to remove its exploration commitment for the Don Juan joint venture.

Consuelo is located just 10 kilometres from Glencore Xstrata's producing Rolleston mine and has an Exploration Target of between 800 and 1700 million tonnes of high grade coal.

The company has negotiated a realignment of the Don Juan agreement with Coal Face Resources that removes the commitment to expend $700,000 on exploration.

It has also agreed to vary the binding terms of agreement to reduce the number of options required to be issued to Coal Face under the Consuelo Agreement to 5 million from 10 million, enabling the finalisation of joint venture arrangements.

"We no longer have any commitment to spend on exploration on Don Juan, freeing up resources to fund an exploration program at Consuelo," ICX chief executive officer Glenn Simpson said.

"While Don Juan remains of long term interest, the current coal market demands that we refocus our resources on higher grade coal prospects in the Bowen Basin (the Consuelo Project).

"We are committed to the exploration of the Consuelo Project and believe that the project will deliver strong results for the company. It is a project of significant interest to a number of international strategic investors and we continue to negotiate and liaise with those investors as we move forward with initial exploration of the area".

Coal Face Resources variations

Under the variation to the Don Juan JV, which increases ICX's stake in EPC 2286 to 46% from 20% following the issue of a further 6 million shares, the former commitment to expand $700,000 on exploration and the issue of further shares to farm-in for a 71% stake has been removed.

The company will continue to share (in line with its 46% interest) in the proceeds from the development and future monetisation of the project.

It has also reduced the number of options required to be issued to Coal Face under the Consuelo Agreement to 5 million from 19 million. The issue of further options remains subject to further negotiation.

ICX has the right to earn up to 71% in EPC 2318 and 2332, which make up the Consuelo Project.

Consuelo Project

The Consuelo Project tenements EPC 2318, 2332, and applications 2327 and 2925 are located within close proximity of one another in a well-defined area of the Bowen Basin.

Together these have the potential to be a flagship project for the company providing it with a major stake in a potentially large coal prospect in the Bowen Basin, one of the world's premier coal basins.

The project is targeting a large high-grade coal deposit with potential for producing a washed semi-soft coking coal product.

These are expected to be found in the Bandanna Formation - the same formation that hosts coal produced from Rollerstone - at mineable depths.

Consuelo has open-cut and underground potential and the company is working toward the rapid development of the project.

Importantly, it is located within 10 to 20 kilometres of the existing Blackwater Rail line to Gladstone that currently services the Barney Point Coal terminal, the RG Tanna Coal terminal and the Wiggins Island Coal terminal (Stage 1 under construction).

ICX has commenced engagement with landholders and preliminary notices of entry have been issued. On site visits are scheduled from the 19th October 2013.


International Coal's steps to focus resources on exploring and proving up the promising Consuelo coking coal project should result in an improved allocation of resources.

Given the potential already shown, and infrastructure available, we expect this to be an effective "re-setting" of the company. Interest received from strategic investors is a vindication of the approach and quality of the project.

This provides another leg to exploration blue sky and uplift potential in valuation.

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