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Stock to Watch: METROCOAL LIMITED (MTE)
09:23, Monday, 12 December 2011
CHINESE ABOARD METROCOAL AT 75c A SHARE FOR 15.3pc STAKE
Shares of Metrocoal Ltd (ASX:MTE) fell to 56c on Friday which is a long way from the 75c paid by DADI Engineering (Group) Hong Kong Co Ltd for its 15.3 per cent last month. Neither party is worried after the company increased its resource significantly. Metrocoal announced a maiden resource for the Dalby West project (EPC1166) of 520 Mt thermal coal following completion of the 2011 exploration drilling program. The resource estimate is based on using underground mining methods to extract the coal seams and JORC Code (2004). During the exploration season Metrocoal completed two drill holes totalling 689 metres on the Dalby West tenement. The aim of the exploration program was to establish correlation of the known seams within EPC1166. All recognised coal seams from the Juandah and Taroom coal measures were intersected by both holes. In calculating the JORC-compliant Inferred Resource for Dalby West, Metrocoal was able to use publicly available data from a further 85 holes drilled previously on the tenement.
This enabled a total of 28,316 metres of drill hole data to be utilised. The existing rail infrastructure near Dalby West is at or near capacity. However, recent media reports have advised that the Port of Brisbane and a number of existing coal producers are considering further expansion of the Port of Brisbane and potentially, the rail infrastructure to support these plans. This seam has a minimum thickness of 2.5m and an average thickness of over 4.5m and has the best potential for mining as a single section. Several other seams including the Kogan and Macalister Lower Seams were identified. However these were not classified as resources at this stage of exploration and evaluation due to their apparent proximity to the Macalister Upper Seam. Coal quality analysis was consistent with expectations of the Macalister Upper Seam which is a low sulphur medium ash thermal coal.Meanwhile, DADI Engineering has completed a $24 million investment in Metrocoal at 75c a share, and now holds a 15.3 per cent stake. DADI chairman Dongping Wang has joined the Metrocoal Board and has appointed Robert Finch, managing director of DADI's Australian subsidiary, Aury Australia Pty Ltd, as the alternate director to Mr Wang.Metrocoal chairman David Barwick said finalising the placement was an exciting phase in the development of the company's Surat Basin thermal coal projects. "We could not have wished for a more professional partner in DADI and we look forward to Mr Wang joining our Board," Mr Barwick said.
DADI is a major Chinese coal group that offers a full range of coal services including open cut mine design, underground mine design, coal process plant design, coal processing research and development and engineering, procurement and construction projects. DADI has over 2,000 employees and has been involved in many significant coal projects including the completion of more than 30 open cut and underground mining projects, the design and supply of over 70 coal processing plants and three water slurry treatment plants.
SHARE PRICE MOVEMENTS
Shares of Metrocoal lost 4.5c to 56.5c on Friday. Rolling high for the year is $1 and low 27c. The company has 208.8 million shares on issue with a market cap of $118 million. At the annual meeting last month, shareholders were told of extensive and attractive coal tenements with an exploration target of 2.5-3.5 billion tonnes by December.
The current JORC resource is 2,363Mt (1,188Mt Inferred and 174.9Mt Indicated).
BACKGROUND
Metrocoal joined the ASX list on December 4, 2009.The company's major project is Dalby West, located at the southeastern end of the Surat Basin adjacent to the Kumbarilla Ridge which forms the boundary with the Moreton Basin.
It consists of 97 sub-blocks (296 sq kms) located west of Dalby.The tenements cover the Walloon sub-group immediately down dip of Peabody's large Wilkie Creek open cut thermal coal mine and deposit. Metrocoal has confirmed the Walloon sub-group is continuous along and down dip from this deposit into EPC1166 following a review of historical exploration data. Historic exploration data was derived from 'open file' company progress and relinquishment reports from eleven previous Exploration Permits for coal which wholly or partially covered sub-blocks of EPC1166.
Metrocoal issued a prospectus in 2009 and planned an Exploration Target of 80Mt to 110Mt for the Ducklo West project area within EPC1166. Metrocoal holds extensive coal exploration tenements in the Surat Coal Basin covering approximately 4,000 square kilometres. These tenements are down dip of well known resources including Wandoan, Elimatta, Cameby Downs and Worri. Based on the geological information from the historic drilling programs and its own drilling results, Metrocoal realistically expects to identify a coal resource of at least two billion tonnes with a JORC Code classification of "inferred" or better, within the next two years for conventional underground coal mining.