www.reyresources.com
Rey Resources (ASX: REY) is thermal coal development company with a large resource and major land position of 8,000km2 in the emerging Canning Basin of Western Australia. A Pre Feasibility Study on the firm’s maiden 511Mt JORC resource at Duchess Paradise was completed in January 2010 and revealed a 2Mtpa highwall mining export thermal coal operation, commencing production in 2013, to be financially robust. Capital costs are estimated at A$113 million and operating costs at A$60/t FOBT Derby, where Rey has its own port and loading facility. A major exploration program in 2010 over 100kms of subcrop will seek to extend the 8 year life of the proposed operation and add new resources.
Rey Resources to commence highly anticipated drill program at Duchess coal project, DFS completed in
Rey Resources (ASX: REY) has recommenced its 2011 drilling program, after the wet season, at the Duchess Paradise thermal coal project in Western Australia, to expand shallow coal thermal coal reserves to extend the 10 year life.
In the last month, Rey has completed most of the necessary heritage clearances with Traditional Owners, re-established the exploration camp and mobilised drilling equipment.
New exploration will then focus on areas of sub-crop that are closer to the Derby port operations and could result in possible improvements to transport costs. Exploration of the sub-crop had been an aim of the 2010 drill program, but was not able to be completed before the commencement of the wet season.
Drilling will then focus on upgrading the large coal resources identified in the P1 coal resource statement. This is in addition to the above ground (high wall mining) activities in the shallower part of the planned Duchess Paradise project.
Definitive Feasibility Study Advanced
Rey is on track to complete a Definite Feasibility Study (DFS) in June, for an initial low-impact slot mining operation using high wall machinery on its Duchess Paradise resource.
Most key transportation infrastructure for the proposed initial operation is in place. Post approvals, product coal is expected to travel by road for 175 kilometres to the Port of Derby, where Rey Resources holds a sub-lease over port facilities and owns loading equipment, for shipping to nearby growing markets in China and India.
Comment
What many investors may have missed is that Rey's Duchess Paradise project is over 2 kilometres but the coal actually extends for over 300 kilometres. This points to the massive coal exploration upside at Duchess and the dis-connect between current valuation of around $70 million relative to potential resource, and ultimately signficantly higher production profile.
The completion of the DFS is likely to drive Rey's valuation growth as it builds momentum towards its initial mining operation planned for 2013.
