International Coal (ASX: ICX) has entered into a farm-in and joint venture agreement with Queensland Coal Investments, a wholly owned subsidiary of mining heavyweight Hancock Prospecting, which can earn up to a 51% interest in the Bundaberg coking coal project.
Queensland Coal Investments can earn an initial 25% interest through the staged development and expenditure of A$1.5 million and a further 26% through the expenditure of an additional $1.5 million.
In addition to the earn-in payments, Queensland Coal Investments must also pay International Coal $2 million upon attaining the 51% interest in the project.
Importantly, this provides International Coal with required exploration funding to advance the project.
Hugh Dai, executive director, told Proactive Investors today the deal represented a recognition of the value of International Coal's Bundaberg tenements by Queensland Coal Investments.
"For this deal you can see they can earn 51% for $5 million, and the tenements you are probably talking about $9 or $10 million in value.
"Secondly it adds credibility to our company and our project."
The Bundaberg Project is part of a solidly developing hard coking coal region, which hosts Northern Energy's (ASX: NEC) proposed 105 million tonne Colton Mine 45 kilometres to the south of the project.
Bundaberg also lies adjacent to Guildford Coal's (ASX: GUF) exploration permit EPC 1872 where current exploration is being undertaken. Other near neighbours to the project include Cliff Resources and Hancock Coal.
The Bundaberg Project already has a small JORC Resource of around 1.5 million tonnes, however the exploration target is 280-370 million tonnes of coking coal.
During 2011, International Coal worked closely with the Moultrie group in assessing the prospectivity of the project.
Bundaberg has shown the potential for large tonnages of thermal and coking coal over two exploration coal-bearing targets - the Burrum Coal Measures and the Maryborough Formation.
The primary target is Cretaceous coking coals within the Burrum Coal Measures.
International Coal has completed negotiations with the majority of landowners within the project area and lodged compensation agreements with the Queensland Government.
For a company the size of International Coal, with a market cap. of $33 million, this deal is the equivalent of having truly arrived, as well this would appear to underwrite the Company's exploration effort.
We believe the market, given the risk adverse environment, may have missed the import of the deal in providing a further leg up in the market valuation of International Coal.
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