Coal news and updates

Fox Resources (ASX: FXR) and International Coal (ASX: ICX) have reached an information sharing arrangement for their adjacent hard coking coal projects at Bundaberg, Queensland, which should see Fox's share price lifting today.

 

This represents the first step towards possible joint development of the coal seams in the area where recent drilling by Fox has intersected 2.45 metres of coal at the Fox 1 coal.

 

Notably, this indicates that the coal resource of 37.9 million tonnes identified by International Coal and Hancock Prospecting in EPC2196 just 2.5 kilometres to the north extends southwards into EPC1523.

 

“The (data sharing) arrangement is an initial step toward evaluating the economic viability of the combined coal seams that occur on EPC2196 and EPC1523,” Fox managing director Paul Dunbar said.

 

“We are going to work together in a transparent manner to evaluate the potential and possible economic viability of the combined project. It’s in our best interest to see the project evaluated and potentially developed to its maximum potential.”

 

ICX chief executive officer Glenn Simpson said the next step would be to refine their understanding of the resource, its potential and to move towards conceptualising the opportunity it presents.

 

“Having a strong relationship with Fox Resources will ensure we maximize that opportunity and makes perfect sense for the potential development of the area,” he added.

 

Bundaberg Coking Coal

 

Fox and ICX have agreed to work together to develop the resource at Bundaberg held under EPC1523 (Fox 100%) and EPC2196 (ICX 75%, Hancock 25%).

 

This paves the way for further cooperation between the two companies on the development of the project, ensuring that the resource potential at Bundaberg is maximised.

 

Recent drilling by Fox has intersected 2.45 metres of coal seams at the Fox 1 hole. These are interpreted as being the same coal measures intersected on EPC2196 though the parting between the seams is narrower with two of the seams less than 30 centimetres apart.

 

Earlier holes in the current program had intersected 3.47 metres and 2.4 metres of coal.

 

A resource is expected to be estimated on EPC1523 once data from the recently completed drilling program is compiled.

 

Fox had previously noted that based on several geological consultants’ reports and previous investigations, the most promising area within EPC1523 is a 15 kilometre north-south corridor along the western margin of the tenement. 

 

This corridor has the potential to host a small to medium sized coking coal deposit in the order of 5Mt to 20Mt.

 

Funding for the exploration program is covered by the $3.8 million package secured in early October 2013 from the Lind Partners’ Australian Special Opportunity Fund.

 

Analysis

 

Fox Resources and ICX’s agreement to share data from their adjacent coking coal projects will ensure that the resource potential in EPC1523 and EPC2196 and development options are maximised.

 

Given that Fox’s exploration indicates that the identified resource of 37.9Mt in ICX’s EPC 2196 extends southwards into EPC 1523, the arrangement makes sense, allowing both companies to gain a better understanding of what looks increasingly like a single, linked resource.

 

That the arrangement could also pave the way for joint development is also encouraging, allowing the companies to combine their resources for a single project, bringing economies of scale as well as faster development options.

 

This is a value accretive agreement for Fox as ICX has reached an agreement with Gina Hancock's Queensland Coal Investments to take over the management and operation of EPC 2194, 2195 and 2196. (It has a 25% stake in the project).

 

However, the ramifications of this agreement and in particular this piece should not be overlooked by investors to the future development of the contiguous projects.

 

Source: http://www.proactiveinvestors.com.au/