Perth-based C @ Limited (ASX: CEO) will acquire eight highly prospective Mongolian coal licences for US$7.8 million after it signed a conditional Share Sale Agreement with Peabody-Winsway Resources to acquire all of the issued capital in its subsidiary BDBL.
Importantly, the eight coal licences cover 625 square kilometres in a major emerging coal province. The region is characterised by a number of recent major black coal discoveries on the doorstep of the expanding Chinese steel and energy markets.
A number of the licences are close to existing producing assets and infrastructure with close proximity to major energy markets like China and Russia, which make the economics of this project very favourable.
Four of the licences are located in the Ongi River Basin in the Ovorhangay province and four are located in the South Gobi Basin in the South Gobi province.
As part of its technical due diligence on these licences, C @ undertook an exploration drilling program which intersected three coal seams on the Ovorhangay licences.
Initial raw coal quality tests at both Mongolian and Australian laboratories have confirmed high quality coking properties both near surface an at moderate depth, likely to be enhanced by washing.
All of the licences have had limited exploration but offer considerable potential.
C @ will now undertake a capital raising of up to A$28 million, including a $3 million priority issue to eligible shareholders.
Upon completion of the acquisition, C @ will immediately undertake Phase II of its exploration program which will include geophysics and a substantial drilling program.
Priority will be given to the Teeg licence located in Ovorhangay, which intersected two significant coal seams during the company’s Phase I exploration program.
C @ will undertake a geophysical survey to identify the potential black coal extensions concealed on the licence to support key targets of the drilling program.
The company is aiming to define a JORC Resource for the project by early next year.
Mongolia Infrastructure
To support the mining industry, the Mongolian Government has approved plans for an approximately 5700 kilometre long railway to be built in three stages.
The first stage will see 1530 kilometres of track built from Nariin Sukhait in the South Gobi province through the cities of Sainshand and Choybalsan into Russia, connecting to the existing Russian railway line system that extends to the Russian Pacific ports of Zarubino, Vanino and Vladivostok.
Construction on the first stage of the railway is expected to begin in 2012 and work on stage two is expected to start in 2015.
CEO Price at posting:
6.9¢ Sentiment: Buy Disclosure: Held
