NSL Consolidated has signed a conditional agreement to acquire four exploration permits covering 2,585 square kilometres in Queensland, which are considered highly prospective for thermal coal.
The projects are located in the Eromanga Basin in South Western Queensland adjacent to similar projects held by East Energy Resources and the soon to be listed International Coal Limited.
The company is targeting a similar style of mineralization to East Energy Resources' nearby 1.2 billion tonne Inferred Resource EPC 11492.
An exploration target of between 500 million tonnes to 600 million tonnes of thermal coal has identified for EPCA 2198 alone with geological assessment of the other EPCAs set to occur over the coming weeks. The projects have a low acquisition cost, with small upfront consideration and scaling payments to be made upon the granting of the EPCs and the establishment of JORC resources.
There is potential for the company to leverage Indian demand for coal products through existing local Indian experience. NSL said it will immediately progress further legal and geological due diligence.
Mr Cedric Goode NSL managing director said this is an excellent opportunity for NSL to acquire a low entry cost exposure to significant exploration potential for coal resources in a currently very active area for exploration in Queensland.
He said that “We have taken the first step into what is potentially a very attractive second bulk commodity which is enjoying similar buoyant demand conditions as our iron ore interests."
The company said the acquisition doesn't distract from its ongoing operations in India and expects its detailed knowledge of the Indian market to be highly beneficial in establishing off-take arrangements should the projects reach production.
NSL will now proceed to perform legal due diligence and geological due diligence prior to settlement of the option agreement. NSL has secured the rights to acquire the projects with a small initial cash payment to be followed by further cash payments and share issues as the project progresses through the due diligence process.
The majority of the acquisition costs are contingent upon JORC Resources being established at the projects.
The consideration payable to the vendor is
1. The payment of USD 50,000 contemporaneously with the execution of the Tenement Acquisition Agreement;
2. The payment of USD 150,000 on or before 5pm (Perth time) on 22 June 2011;
3. The payment of USD 100,000 at Settlement
4. The payment of USD 200,000 and the issue of the Consideration Securities on the date that the last of the Tenements is granted;
5. The payment of USD 1.25 million on establishment of a JORC Inferred Resource of coal of at least 500 million tonnes across any or all of the four Tenements
6. The payment of USD 1.25 million on establishment of a JORC Indicated Resource of coal of at least 250 million tonnes across any or all of the four Tenements.
