Aspire Mining (ASX: AKM) has already defined the second largest coking coal Reserve in Mongolia, intersecting coal during drilling outside the existing Resource at its Ovoot Coking Coal Project in Mongolia could increase the size.
This occurred during its exploration drilling program to test for extensions to the mineralisation.
These new extensions have the potential to extend the open pit further to the north.
Importantly, there is still plenty of room for Ovoot to grow into a Tier 1 Resource, with only around 20% of the Ovoot Basin explored by Aspire.
Although possessing a large coal reserve provides a high level of confidence.
Aspire has identified an extension of coal 800 metres to the northeast that could potentially add to existing open cut Coal Reserves.
The further exploration success now potentially brings the Ovoot Project open pit coal Resources and Reserves within around 1 kilometre of the underground Resources to the northeast.
The best result so far has been seen in a hole that intersected 12.5 metres of coal from 195 metres.
The initial two geotechnical holes have intersected coal outside the existing coal Resource envelope, with the best result 11.5 metres of coal from 241 metres.
David Paull, managing director, commented: "The existing 178 million tonne coking coal Reserve base is significant and already the second largest coking coal Reserve in Mongolia.
"There is the potential with these resource extensions and geotechnical studies to see a further increase to our coal Reserves."
Aspire is also currently drilling a number of geotechnical holes designed to provide data for rock strength below 300 metres.
This will allow for pit wall designs below 300 metres which potentially could lead to increased coal Reserves.
Aspire is now moving exploration to the Hurimt prospect, located in the central Ovoot Basin around 20 kilometres to the east of the Ovoot Project.
The company has received final approvals for accessing drill sites for an initial first pass 2,000 metre exploration program at the prospect, and will test the interpreted depositional environment, which is similar to Ovoot.
A short initial reconnaissance drilling program was conducted at Hurimt in 2010 and showed Jurassic sediments were present, however no hole was completed to basement.
Aspire is targeting near surface coking coal amenable to open pit mining that will complement the world class Ovoot Project.
It is expected that this exploration program will be completed by the end of October 2012.
Aspire has previously completed a Pre-Feasibility Study that has delivered positive parameters, including an internal rate of return of 43%.
The PFS confirms that Ovoot is financially robust and technically and commercially feasible.
What drives the positive economics, in fact the keys to the project, are the LOM 82% average conversion rate of ROM tonnes to product together with a low LOM strip ratio of 7.6 bcm of waste per ROM tonne of coal including pre-strip.
The PFS assumes completion of the multi-user rail line extending the Trans-Mongolian railway at Erdenet through to Moron by 2016. A separate Rail Pre-Feasibility Study for this line has been approved by the Mongolian Rail Authority.
The first stage project would involve production of 6 million tonnes per annum of saleable coal delivered by 191 kilometres over sealed road to the new railhead at Moron before being transported to end markets from 2016.
The staged development will de-risk the production ramp up and enable the first stage operational cashflows to underpin a future Rail Spur Line connection from Ovoot to link up with the multi-user rail line at Moron.
The Rail Spur Line from Ovoot to Moron will facilitate the targeted full scale 12 million tonnes per annum coking coal operation.
Significantly, Aspire is extremely well funded to advance its exploration effort at Ovoot with nearly A$20 million cash at the end of the June quarter.
Aspire's Ovoot Project has the fourth largest coal Reserve on Proactive Investors' ASX listed coal explorers and developers peer list. The Ovoot Project is the second largest coking coal Reserve in Mongolia after the very large government owned Tavan Tolgoi deposit.
Simply, Ovoot is an exceptional deposit that contains high grade coking coal with a 96-97% vitrinite content that identifies it as one of the highest value in-situ coal deposits in the country, and in the world. With drilling and evaluation of Ovoot only 20% complete, Aspire is in the early stages of developing one of the world's largest undeveloped coal resources.
Aspire is fully funded for exploration and development work through to completion of the Feasibility Study that is due at the end of the year.
Aspire also has the support of Noble Group Ltd, which is one of the world's largest commodity trading and logistics companies that moves coal into most major global markets, and has strategic alliances and relationships across Russia and China.
There are significant valuation changing catalysts ahead in the next 6-12 months for Aspire. With the re-tracement of coal sector prices, Aspire has not been immune in this regard. However, at the current valuation of $80.6 million Aspire is rated at the same valuation it was in September 2010 - when Ovoot was a 330 million tonne resource and with no defined reserve.
Significant value has clearly been created by Aspire during that time, the mis-pricing of valuation of Aspire is acute, providing a significant opportunity for investors.
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