ASX
RELEASE
22 May,
2008
FLOAT OF CLEANER ENERGY ASSETS IS
FOCUS OF
NEW QUEENSLAND COAL DRILLING
PROGRAM
The resources group Metallica Minerals (ASX:MLM) has acquired
significant coal assets in the Surat Basin and intends to setup its subsidiary,
MetroCoal Ltd, as a stand alone company as part of its strategy to add value
while it focuses on its core business as a developing nickel producer.
The potential for a float of coal-based clean energy assets by
resources group, Metallica Minerals Ltd (ASX “MLM”), has moved a step closer
with the announcement today of a major drilling campaign over the Company’s
extensive coal rich tenements within the Surat Basin.
Metallica said today the new drilling campaign was expected to
provide sufficient confirmation of the coal seams targeted from historical
exploration data to underpin a float of its significant Surat Basin assets in the first half of next
year.
This would see Metallica join Australia’s emerging Underground Coal
Gasification (UCG) sector as part of the group’s investment and growth strategy
of building cornerstone revenue contributors across a range of higher demand
mineral and energy commodities.
UCG is becoming an established energy process worldwide but is making
only its first inroads into Australia’s energy and fuel markets with a number
of now successful demonstration and commercial size projects underway, primarily
in southern Queensland coal basins.
The process heats coal at depth so that gasification of the seams
takes place underground instead of at surface, with the resultant gas stream
utilised at surface into power generation, clean diesel, other fuels or
feedstock for the fertiliser and explosives industries.
“The climate change impetus, sustained high energy, threat of peak
oil and fuel prices and current economic uncertainty have created a far more
receptive market awareness of coal’s broader potential as a cleaner energy
contributor,” Metallica’s Managing Director, Mr Andrew Gillies, said today in
announcing the drill campaign.
“Against this backdrop, thermal coal prices are now exceeding US$100
per tonne and oil has found a home lately around an unprecedented US$128 per
barrel and with our Metrocoal strategy we have plans to produce both coal and
fuels generated from coal – we have an excellent coal footprint for this
objective.” Mr Gillies said.
“The impact of these price pressures is being immediately and
alarmingly felt across the cost of transport, production, farming, basic food
necessities and household budgets.
“This is hastening government and industry attention on energy
options and delivering new value to our significant Surat Basin coal assets, so much so that subject
to the drill results, we believe they will now underpin a substantial Initial
Public Offer (IPO) within 12 months.”
Metallica’s coal assets are held within its wholly owned subsidiary,
MetroCoal Ltd, which in December last year was granted six coal exploration
permits covering more than 4,000 square kilometres of coal bearing strata in the
Surat and Ipswich Coal
Basins in southern Queensland. Application
for a seventh permit in the Surat Basin was submitted in April this year –
see Figure 1.
All of the tenements were acquired to specifically explore for
conventional coal targets (for open cut and underground mining) and evaluate UCG
as coals in the Surat Basin have a high hydrogen content and
have been shown to be highly amenable to gasification to produce syngas (coal
gas).
“Metallica is very familiar with southern Queensland coal areas as
it previously held a substantial portfolio of coal properties which were sold to
Cockatoo Coal Ltd (ASX COK) in mid 2007 and holds 25 million shares Cockatoo. ”
Mr Gillies said.
The exploration program announced today will also target seams that
have conventional underground coal mining potential.
“Metallica’s view is that the Surat Coal
Basin has the potential to
host a world class petrochemical industry producing clean diesel and other fuel
by-products,” Mr Gillies said.
“Several companies in Australia, including ASX-listed Linc
Energy and Metex/Carbon Energy, are now well advanced with plans for pilot
plants based on UCG in areas close to the MetroCoal tenements.
“The recent announcement in the United
States have proposed a mandate on the
production of Coal to Liquids (CTL) fuels, paired with the current high oil
price, provides further impetus to the commercial application of the conversion
technology.”
2008 coal drill
campaign
Metallica has continued with its assessment of the coal deposits
identifying a number of prospective target areas within the tenements focused on
the Macalister seam, in the Juandah coal measures.
The exploration program announced today will comprise initial
percussion drilling to test seam thickness and continuity of previously
identified coal seams from historical drilling. Where capacity allows, the
entire Juandah section will be tested as there is potential for multi seam
resources. Seams identified will be
cored to allow for higher confidence. Approximately 5,000 m of drilling for
about 15 holes drilled to a depth of between 250-400m is planned for.
Most of the drilling is expected to be completed on key areas in the
Surat Basin this year, to provide the confirmation of
attractive large targets and expand the Surat coal and UCG-CTL project data base for a
proposed MetroCoal IPO proposal in the first half of 2009.
MetroCoal
Development
MetroCoal’s funding will be sought from seed capital raisings in the
next couple of months. This seed raising will conserve Metallica’s existing cash
reserves of over $5m and its listed share investment in Cockatoo Coal worth (on
current prices) over $23 million.
Metallica continues to look for opportunities to enhance its core
nickel projects and to divest or joint venture its non-core mineral properties,
such as its Metrocoal assets to enable it to maintain focus on and fund its key
NORNICO nickel project.
For Further
Information
Andrew
Gillies
Kevin Skinner
Managing Director, Metallica
Minerals
Ltd
Field Public Relations
Ph: (07) 3891 9611, Mob: 0416 137
556
Ph: (08) 8234 9555, Mob: 0414 822
631