The Mining Permit issued by the New Zealand Ministry of Economic Development is for a term of 12 years and requires that mining start at Escarpment within five years.

“The support of the New Zealand government for Bathurst’s Buller project is greatly appreciated,” Bathurst managing director Hamish Bohannan said.

“We look forward to working with the New Zealand government to develop the Escarpment mine and create jobs in the Buller region. A successful Bathurst will benefit both our shareholders and the regional economy surrounding our mines.”

The Buller agreement has been structured on the premise of Bathurst paying L&M on a staged basis, as and when value is proved up for the project.

Having been awarded a mining permit, the next steps in developing the Buller project are obtaining relevant environmental approvals, increasing Buller reserves and resources to a sufficient size to allow a minimum 20-year mine life, and finalising the definitive feasibility study. Discussions with offtake partners will also take place.

Once these steps are completed, Bathurst will seek to exercise its option to purchase the Buller project from L&M Coal Holdings. Bathurst expects this to occur in the fourth quarter of 2010, with mining to commence in Q4 2011 at an initial rate of 1 million tonnes per annum.

The principal terms of the agreement involve payment of a $US5 million (about $A6 million) option by June 30; payment of $US35 million by November 5, 2010, once the definitive feasibility study has been completed; and payment of $US40 million once 25,000 tonnes of saleable coal has been shipped.

A further payment of $US40 million will be made once 1 million tonnes of saleable coal has been shipped.

L&M will be granted 5% of the listed equity in Bathurst once these target levels have been reached, subject to shareholder approval. In addition, Bathurst will pay L&M a 1.75% royalty on coal revenue over the life of the mine.

Bathurst’s shares gained 1.5c to 19c in morning trade.