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Pan Asia Corporation Delivers Technical And Financial Confidence For TCM Coal Project

Pan Asia Corporation (ASX: PZC) has confirmed the technical and financial viability of its Transcoal Minergy (NYSE:TCM) Coal Project in Indonesia in a recently released Feasibility Study.

The Feasibility Study has shown that the project can deliver saleable coal of around 1.5 million tonnes per annum over a 15 year mine life.

Average operating costs have been estimated at US$52 per tonne compared to the average sales price of around $111.46 per tonne.

The study has also delivered a base case net present value of between $124 million and $136 million and an internal rate of return of around 20.85%.

While the original targeted saleable coal of 22.5 million tonnes is considered achievable the base case mine plan and net present value is currently based on 18 million tonnes of saleable coal.

However, there is further exploration upside at TCM with current infill drilling on the immediately adjacent northern area designed to help refine the mine plan and expected to increase saleable tonnages.

The wider spaced drilling underway further to the north could also extend the current mine life.

Alan Hopkins, chief executive officer, commented on the positive result:

"This is a major milestone for the company with our flagship project receiving such a positive independent review."

Highlighting the exploration potential at TCM, Pan Asia has revised its exploration target upwards to between 200 and 220 million tonnes of 6,500 to 6,800 kilocalorie coal.

The company committed to the higher exploration target following an upgrade in the JORC Resource to 128.8 million tonnes earlier this month.

This was accompanied by an increase in the higher confidence Measured Resources to 50.2 million tonnes, compared to the October Resource of 35.6 million tonnes.

The current resource is based on drilling only part of the concession. Previous drilling has confirmed the continuity of the same coal seams from the TCM South Deposit into the north of the concession.

This could effectively almost double the existing Resource, as well as the mine life, which would improve the project's net present value substantially.

Next steps

Pan Asia is continuing to add to the already detailed Feasibility Study and will now have it independently reviewed by a third party, which will take some weeks.

Kopex US$1m commitment

Pan Asia has secured one of the largest global groups in the coal mining sector, Kopex Group, as a partner on the TCM Project.

Late last year Kopex agreed to step up its commitment to the project with an additional US$1 million in funding to cover the costs of an expanded drilling program.

The importance of this is that the TCM Project is fully funded through to the completion of the final Feasibility Study.

Kopex's total commitment to date towards the drilling program now stands at around US$1.6 million.

Analysis

Pan Asia has an enterprise value of just A$14 million and an EV/Resource valuation of just A$0.11 per tonne, which is light compared to the average EV/Resource of $0.46 for peer explorers.

There are a number of factors which should improve the value of the TCM Project including the extensional potential as well as its location next to infrastructure and an already operational mine.

The TCM Project hosts high quality coal, which offers high revenue per tonne, and its location and proximity to infrastructure offsets higher mining costs.

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