Galway Resources Ltd (TSX-V: GWY) said Prodeco, the Colombian subsidiary of Xstrata PLC (LSE: XTA), has begun drilling the first of 19 holes in the initial drill program at Galway's GALCA coal project.
Galway has an exploration and joint venture agreement with Prodeco, the third largest coal producer in Colombia, with 11 million tons of annual coal production.
The GALCA coal project comprises 132,000 hectares that Galway believes could host a new undiscovered coal basin that occurs close to surface. This drilling program will be focused on two areas, the northern flank and the southeastern portion, that appear to have the highest prospect of coal near the surface.
Galway president and CEO Robert Hinchcliffe commented: “This area has the potential to host several new coal deposits with great existing infrastructure. The upside could be tremendous."
The JV agreement envisages that Prodeco funds the first 19 drill holes and will earn a 60 percent stake in the project when it agrees to finance the feasibility drilling program. Prodeco will then earn the remaining 40 percent interest by paying Galway an already agreed value per tonne of economically mineable open-cut reserves determined in accordance with the JORC Code, up to US$70 million.
The GALCA project is located in the Cesar State. The project has very favorable infrastructure, with the Fenoco rail line running through the middle of the concession area, and the Rio Magdalena River and the National Road to the Caribbean coast and ports running along the western edge of the project.