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Pan Asia Corporation On Fast Track To Development Deal With Ongoing Success At TCM

Pan Asia Corporation (ASX: PZC) has intersected coal in all six holes drilled so far in the current phase four drilling program being carried out in the north of the Transcoal Minergy (NYSE:TCM) Coal Project in Indonesia.

The target coal seams were intersected as expected from depths of between 356 metres and 552 metres, with thicknesses ranging from 0.15 metres to 2.5 metres.

Geological interpretation of the intersected coal by Pan Asia and Kopex conforms to the known coal formation, and coal quality is expected to be in line with all data obtained from all drilling in the south to date.

Forward plan

Interpretation of coal intercepts from this latest drilling and re-optimisation to extend the current mine design further north and update the base case Feasibility Study is underway.

Last month Pan Asia confirmed the technical and financial viability of the TCM Project with the release of a Feasibility Study showing the project can deliver saleable coal of around 1.5 million tonnes per annum over a 15 year mine life.

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%.

Pan Asia expects the updated mine design and financial model to be completed by early July.

A remaining three holes are to be drilled as part of the phase four drilling program and are scheduled for completion in mid-July.

Pan Asia is targeting an update to the current 128.8 million tonne Resource in mid-August.

Locking in value for TCM

Late last month Proactive Investors spoke to Alan Hopkins, chief executive officer, from Jakarta on the next big re-rating event for the company.

Hopkins said the next thing for Pan Asia to do is to assemble the best deal with a potential offtake or development partner to advance the project to the next level.

"When we do that, that's when we'll lock in the value into the project and then into the company.

"As long as we do that deal on good terms, which we think we'll be able to do, then that's the big re-rating event for us."

Highlighting the strong capability the company already has on its TCM Project, Pan Asia previously secured one of the largest global groups in the coal mining sector, Kopex Group, as a partner on the 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.

Hopkins indicated there may be the potential for Kopex to get more involved in the development of the project.

"I think there's a very good possibility that they would look to get more significantly involved in the project.

"For us it's a matter of the commercial terms. If they get involved in the project is that going to give us the maximum value for that project, for our company."

Analysis

Interpretation of coal intercepts from this latest drilling and re-optimisation to extend the current mine design further north and update the base case Feasibility Study is underway. It is expected that the updated mine design and financial model will be completed by early July.

This implies and projects that the economics for the project will improve, with coal in all holes.

A further release to the market updating the JORC Resource is expected in mid-August, which presents some nice important milestones for Pan Asia in July and August.

If Pan Asia were to reach its exploration target of 200 to 220 million tonnes, and today's results put it well on its way, its current $14 millon market valuation per tonne of coal is going to look very light indeed.

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