The junior said it had signed a binding term sheet with unlisted Australian company Regius Coal Mining to acquire an initial 35% interest in its subsidiary Regius Coal SPV, which holds interests in two exploration licenses in the coal-rich Tete province.

Under the terms of the acquisition, eighteen months after completion of the initial subscription Queensland Bauxite will have the right to increase its Regius Coal SPV interest to 51% for an aggregate amount of $1.2 million in one or more tranches.

Upon completion of the transaction, Queensland Bauxite and Regius Coal, as joint venture partners, intend to progress coal exploration activities over the 4600-hectare 4070L and the 16,000ha 4169L license areas.

Regius currently holds an 80% interest in 4070L and has the right to acquire up to an 85% interest in 4169L.

Queensland Bauxite said the project was attractive to the company because the region was considered one of the largest underdeveloped coal basins in the world.

It added that the license areas were prospective for high quality coking and thermal coal and surrounded by major coal players such as Vale and Rio Tinto.

“The company has budgeted approximately $300,000 in the upcoming year in exploration expenditure on its new coal project interests through Regius Coal SPV on the initial drilling programs,” Queensland Bauxite said in the announcement.

“Following assessing the results on those programs, QBL will reassess its further exploration budget for the remainder of the year on all its projects, including whether it intends to purchase the further equity in Regius Coal SPV – and will inform the market accordingly.”

Queensland Bauxite has a number of bauxite and gold exploration projects in the eastern states of Australia.

The company’s cash position as at March 31 was $A4.06 million.