The deal with Mongolian company Khurgatai Khairkhan and project promoters Red Island Resources is contingent on Windy raising more than $A2.65 million along with the necessary shareholder and regulatory approvals.

Located in Khuvsgul Province, 1881m of diamond drilling at the project has identified two thick seams, with the combined thickness ranging from 6m to 45m.

Coal intersections ranged from depths of 104.5m to 326m.

Testing averaged the ash content to 13.8% on an air-dried basis with 0.88% sulfur content and a gross calorific value of 7180 kilocalories per kilogram adb.

Given the ash content, the coal requires washing as part of the production process.

Should the acquisition go ahead, Windy aims to kick off a 2500m drilling program in the March quarter and to spend $US1 million on exploration in the first 12 months.

The explorer plans to make a placement of 100 million shares at A2.65c each, with a free-attaching Windy option for each issued share valued at an exercise price of 5c and expiring five years from the issue date.

The placement is underwritten by Big Fish Nominees.

Khurgatai holds six licences covering 72,400 hectares, mostly within the Ovoot Basin.

Under the acquisition, Windy will acquire the Mongolian company and all the interest in the Ovoot project.

Windy has gold and nickel projects in Western Australia and is named after the Windy Knobs gold project south of Meekatharra.

Windy shares closed up 43.7% to 4.6c yesterday.