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Strategic Minerals (LON:SML) shares advanced as it emerged its Tatu coal deposit in New Zealand had sufficient resources for a 20 year mine.
A maiden JORC resource estimate from Gordon Geotechniques showed 6.72Mt (million tonnes) of measured and indicated thermal coal, of which 75% was in the high certainty measured category.
The firm aims to complete a bulk sample from the mine in the next quarter to confirm the quality of coal for identified customers, while it progresses a feasibility study to support development, targeted to be published in July.
John Peters, chairman, said the JORC estimate indicated significant quantities of coal and enough to support its production target of at least 200,000 tonnes per year.
“After applying typical bord and pillar recoveries of 60%, the Tatu Project would be expected to have 20 years run of mine life at the minimum targeted production.
“Particularly pleasing is that 75% of the resource is classified as measured under the JORC code which is the highest certainty category of a resource," he said.
First sales of thermal coal are on track for the first half of 2016.
Strategic acquired 51% of Tatu at the end of last month and has an option to buy the remainder.
Speaking to Proactive, Peters said on production: "Our target is only 200/250,000 tonnes per annum. We are not looking to make this a huge thing, but at the same time, we are still targeting pre-tax US$15 a tonne so it's a considerable money earner for us.."
Multiplying 200,000 tonnes by US$15 gives US$3mln per annum, he highlighted.
He added that there will also even be saleable coal generated when the main tunnel access to the mine is started.
"So there is cash flow even when we are constructing, which helps to lower the overall capital expenditure," he said.
"Realistically we are getting into this in a very cheap manner."
Strategic shares added 4.55% to 0.575p on the day.