Metallica announced yesterday that Cougar Energy, an unlisted Australian company with expertise in underground coal gasification, will study the feasibility of producing gas from Metallica’s Condamine, Miles-Chinchilla and Injune coal projects.

Metallica managing director Andrew Gillies said underground coal gasification was a process for the in-situ conversion of coal into a gas, which can be brought to the surface through drilled production wells and used as a fuel for power generation or converted to petro-chemical products.

It is more efficient in utilising the energy in the coal than coal methane gas extraction and cheaper than using above ground gasification techniques, the company said.

“The investigation of the potential of underground coal gasification by Cougar Energy does not affect any future plans that Metallica might make to mine these deposits through conventional open cut techniques,” he said.

“The coal that is subject to the agreement with Cougar Energy lies below 130 metres and is unlikely to be economic to extract through an open pit.”

He said the project would add value to the company’s coal development portfolio and was an addition to the company’s mainstream nickel activities in North Queensland.

Under the agreement, Cougar Energy may expend up to $A750,000 within 36 months to earn up to a 70% interest in the Kingaroy project, and up to $550,000 within 36 months of the other Agreements to earn up to an 80% interest in the other projects.

Metallica also has major interests in nickel, bauxite, limestone and scandium and has now acquired joint venture partners to progress its bauxite, coal, scandium, gold and uranium interests.