Two flagship projects of Australian Pacific Coal (AQC), which in December last year had $A1.4 million cash in the bank, could reap big rewards within a few years, if all goes to plan. So far the company has been successful with its activity in seeking exploration opportunities with coal properties that can be followed up with select drilling programs and can enhance their valuable resources for possible development.
AQC is a Brisbane-based junior exploration company that focuses on quality coal projects that have potential for rapid development.
Executive director Paul Byrne has more than 30 years of exploration management experience and has held director positions with several Australian public-listed exploration companies.
AQC’s interests are in 29 coal tenements strategically located in Queensland’s Bowen and Surat basins, but it plans to shed some to focus on a few.
The most advanced and valuable asset is the Coororah project (EPC 1827). Most of AQC’s Bowen Basin projects are in an area that has been actively mined for many decades.
The company is a junior player in this prime coal mining region, which supplies some of the world’s highest quality metallurgical, PCI and thermal coal for export.
Cooroorah, unlike the rest of the projects within the “Blackwater” group of assets, has an inferred resource (in accordance with JORC guidelines) of 107 million tonnes. This project has plenty of upside in utilising established infrastructure.
“Unlike a lot of remote-area coal exploration targets, Cooroorah sits smack bang in ‘the hub of the wheel’, right in the middle of some of the biggest producing coal mines in the state,” Byrne said.
“This provides huge advantages to the development stage because we don’t need to put in tailings dams, wash plants, roads or power because it’s already there.
“Future mining at Cooroorah also gives us the ability to potentially sell our coal across the fence to our neighbours on toll treatment arrangements, so there’s no need for rail or port capital investment.
“Also for processing, if we need to wash, screen, crush and load our coal, we have the scope to negotiate with three neighbouring coal mines: Curragh, BMA (Billiton Mitsubishi Alliance) and Jellinbah East, which together would produce well in excess of 10Mtpa.”
Another major AQC asset is the joint venture with Rio Tinto, the Mt Hillalong exploration project.
Rio has already paid AQC $2.3 million and has two years from the date of first entry on to the tenement to complete several drill holes to establish an early-stage resource. At Mt Hillalong, Rio has started with some preliminary work and has just completed its aeromagnetic surveying and other geological data compilation.
As part of the joint venture agreement, Rio has the right to purchase 75% of those Mt Hillalong assets at an undisclosed figure, leaving AQC with 25%. With this agreement, AQC has a number of options, which include the choice to exit or to retain the equity position in the asset.
Mt Hillalong is close to one of Rio’s biggest mines in Queensland, the Hail Creek operation.
It is situated less than a kilometre east of AQC’s ground and due south of AQC’s acreage at Elphinstone, which is also owned by Rio. Virtually all the tenure holdings in between these projects belong to either AQC or Rio.
Other AQC assets include exploration projects in the coal hub around the Blackwater area of the Bowen Basin.
There are four main projects – Dingo, Carlo Creek, Churchyard Creek and Mt Stuart. All have the potential to become open cut targets, but at this point they’re still going through a rigorous exploration program.
With all this activity, Byrne said, the company was “clean”.
“We’ve got no tradeable options on issue and no debt,” he said.
AQC also has a number of other significant exploration coal projects which are still going through the grant process, so in the near future the company may end up with additional projects, all in the Bowen Basin.
The company’s exploration team is building sufficient knowledge base and confidence in the geological coal deposit models in the Bowen Basin to undertake challenging new projects.
“At the end of the day the company has two priorities: our Hillalong project with our exploration agreement with Rio Tinto and the possible development of Cooroorah,” Byrne said.
“We’ll just focus on those two main assets which, if they’re both generating coal, will give us revenue streams of several millions of dollars a year. With this plan we can move to become a coal producer in the near future.
“We have another JV agreement with Cuesta Coal, which gives AQC a 10% free carry through to bankable feasibility stage. This agreement involves four main exploration coal project areas with resources in strategic localities adjoining properties held by Xstrata, Adani and New Hope.
“We’ve got some other coal projects that are still in recognised coal basins but some of these have seams that are quite deep. Our main interests are in exploring for shallow underground or open cut coal deposits close to infrastructure. Any projects that we consider are really deeper than about 350m we put into the ‘too hard’ basket.
“Our exploration maintains that there are certainly some companies that still look at those sorts of projects for development. In global terms, that’s still fairly shallow for an underground mine, such as in China where they mine to depths in excess of 1km.
“As you can appreciate, we have quality coal projects in the right localities with early resources and I encourage you to watch this space in the near future, because from little things like our AQC projects, extremely big things should grow.”
In summary, AQC’s coal projects consist of:
- Cooroorah: Mineral development lease (MDL) application and a granted exploration permit for coal, with 107Mt inferred (JORC) resource, located adjacent to the Jellinbah and Curragh-Peabody coal interests and near rail network, processing facilities, targeting shallow underground and open cut metallurgical coal;
- Dingo: Exploration permit for coal, located on a rail network and adjacent to Bandanna Energy’s mining project, targeting open cut metallurgical coal;
- Carlo Creek: Exploration permit for coal, near Blackwater with proposed drilling in Q4 2012 or Q1 2013, targeting open cut metallurgical coal; and
- Churchyard Creek and Mt Stuart: Exploration permits for coal, ongoing drilling and sampling in proximity to the Jellibah-Yarrabee mining district.
Its current joint venture partners are:
- Rio Tinto Limited: The agreement on the Mt Hillalong project covers five exploration permits for coal adjoining the Hail Creek operation; and
- Cuesta Coal Pty Ltd: The agreement on the East Wandoan project near Xstrata, the Acland project near New Hope’s operation and the Galilee Basin project near the Adani Group covers four exploration permits.
AQC’s finances are now in place for all future exploration operations.
*A version of this report, first published in the November 2012 edition of RESOURCESTOCKS magazine, was commissioned by Australian Pacific Coal