More to follow:? More coal encountered. Draig reported three...

More to follow:

? More coal encountered. Draig reported three 20-40 metre (cumulative)
coal intersections at its Teeg licence while following up on its due diligence
drilling programme, which had encountered coal seams up to 60 metres thick
with coking properties. One of the holes was adjacent to the known coal area
while the two others were located in close proximity to each other c. 3.5 km away.
A further eight holes did not encounter significant coal seams. Steeply dipping
coal seams, now estimated by Draig to be around 60 degrees, make identification
of the path of the coal seam through wide step-out drilling somewhat difficult.
When drilling vertically down to a depth of c. 150 metres, like Draig is, the
selection of the drilling location must be within a c. 200-metre band following the
seam. Following the drill results, management continues to target a maiden
resource at Teeg this quarter and is hopeful that the three located coal zones,
which stretch c. 7 km in the distance, are connected by coal with coking
properties. The Teeg drilling programme is ongoing and will continue for around
two more weeks at two holes per day rate with ongoing disclosure of findings.
? So far, so good at Teeg, but still early days. The Teeg results and
disclosure to date are insufficient to form a strong conclusion regarding the
ultimate success of the drilling programme, though we expect the picture to
become clearer within the next several weeks as Draig completes more holes
and releases more detailed data. The near-surface nature of the intercepts and
potential for a strike length of >5 km are positives, although the apparent steeply
dipping nature of the coal seam is a negative as it will mean less coal is likely to
be found at open pit mineable depths as compared with a gently dipping seam.

? Reiterate BUY; Draig more than Teeg. We reiterate our BUY rating
and AUD0.80 TP based on Draig identifying a 150mnt (112.5mnt attributable)
resource across its eight exploration tenements. We continue to be impressed at
the speed with which Managing Director Mark Earley has conducted the
exploration programme. In our opinion, Draig’s value is much more than the
results of the two Teeg licences alone, although they are the most promising in
the near term, as it owns a further six tenements, including four in the South Gobi
near large coking coal discoveries by SouthGobi and Guildford Coal. Exploration
of the other tenements will begin during the summer.