Mozambi Coal (ASX:MOZ) will emerge from a trading halt having acquired two Queensland coal exploration licences from Rio Tinto Exploration Pty Ltd and could acquire three additional coal licences and applications in Queensland.
This surely steps up the pace for Mozambi from a benign interest in two exploration licences in Mozambique last quarter.
Mozambi has moved fast to acquire a 100% interest in EPC 1768 from Rio Tinto, located in the Bowen Basin, 100km west of Mackay, Central Queensland and covering a total area of approximately 30km.
Significantly, adjacent EPC title holders include Aquila Coal, Bowen Central Coal, Dyart Coal Mine Management and Xstrata Coal.
The EPC is located north of Hail Creek mine owned and operated by Rio Tinto and east of Xstrata’s Newlands mine.
It looks to have potential for coal from the Rangal, Fort Cooper and Moranbah Coal Measures.
EPC 2098 “Carmilla” was also acquired by Mozambi which is located adjacent to the Styx Basin, 117km south of Mackay (90km North of Gladstone), Central Queensland.
The licence while greenfields is also adjacent and nearby to EPC title holders include BHP, Anglo Coal and Waratah Coal.
Heads of agreement to acquire rights to three additional coal licenses in QLD
A conditional heads of agreement has been signed to acquire rights to up to 3 further coal licences and applications in Queensland from other project vendors.
Transaction details
All licences acquired and proposed to be acquired were introduced by Perth based Subiaco Capital Pty Ltd.
The transaction is in two parts, as follows:
- Mozambi has paid Rio Tinto Exploration $375,000 for the acquisition of 100% of EPC 1768 and EPC 2098 from RTX.
- Additional milestone payments of up to a further $3 million are due to RTX upon delineation of a Measured Resource in excess of 50 million Tonnes of coking coal and upon commencement of export shipments of coking coal from EPC 1768 and/or EPC 2098.
- A cash transaction fee of $50,000 is also payable to Subiaco Capital Pty Ltd.
Second part:
- A conditional Heads of Agreement (HoA) between Mozambi and the shareholders of Blackall Capital Pty Ltd (Blackall) has been signed to effectively acquire three further areas of tenure in Queensland, including a 95% interest in EPC 2861, as well as EPC 2702 (95%) and EPM 25113 (100%).
- Subject to a formal share sale and purchase agreement and due diligence and obtaining all approvals, the vendors of Blackall will receive up to 30 million new fully paid ordinary shares in Mozambi plus 15 million options to acquire Mozambi shares, exercisable at $0.02 each on or before 31 December 2017.
Analysis
This is a positive step change for Mozambi Coal. Both the Rio projects are highly prospective for metallurgical coal with nearby rail infrastructure.
EPC 1768 in particular appears very interesting and could have multiple exploration targets within well-known coalbearing formations within the Northern Bowen Basin.
Allied with this, historical company coal exploration boreholes intersected shallow coal seams at depths less than 50 metres.
EPC 1768 has up to 3 to 4 coking coal type formations.
Now for a $1.5 million market capped company, Mozambi's coal asset acquisitions in the Bowen Basin with adjacent and nearby EPC holders including Aquila Coal, Xstrata Coal, BHP, Anglo Coal and Waratah Coal - lifts the stakes and valuation metrics considerably for Mozambi.
We consider the changes to be value accretive and support a re-rating in the short term and medium term given current share price of just $0.013.
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