Queensland-based explorer Bowen Coking Coal (ASX: BCB) has secured a farm-in agreement with Sumitomo Corporation over the Hillalong coking coal project, approximately 105km west-southwest of Mackay.
The farm-in, executed between Bowen’s subsidiary Coking Coal One Pty Ltd and Sumitomo-owned SCAP Exploration Pty Ltd, will allow Sumitomo to earn an initial 10% interest by funding $2.5 million in pre-defined exploration expenditure at Hillalong.
It will cover Phase 1 exploration programs for the Hillalong North and Hillalong South priority open pit targets and must be completed within 12 months of commencement of the farm-in in order for Sumitomo to earn its initial stake.
The company will be able to earn an additional 10% by providing a further $5 million in project development funding within 24 months of a Phase 2 work program being approved.
Bowen has granted Sumitomo an exclusivity period of 60 days, during which the parties must agree formal terms of the agreement.
Bowen managing director Gerhard Redelinghuys said the farm-in will allow the company to benefit from Sumitomo’s regional coking coal expertise.
“Sumitomo brings a wealth of experience and significant financial backing in the global coal mining, trading and related steel industries to the Hillalong project,” he said.
“It has a long history in Australia’s coking coal industry and we look forward to building a relationship to the mutual benefit of both companies.”
Located in the northern part of the world-renowned Bowen Basin, the Hillalong project comprises 31 sub‐blocks over approximately 99sq km.
It is west of the Mount Hillalong Anticline and approximately 16km northwest of the large-scale Hail Creek mine, owned by the Glencore-Marubeni-Sumitomo joint venture.
Hillalong contains the Moranbah, Rangal and Fort Cooper coal measures commencing at 150m below surface.
Two economic coal seams – Elphinstone and Hynds (Leichardt and Vermont equivalents) – within Rangal are currently being mined at nearby mines.
Historical exploration by Rio Tinto (ASX: RIO) proved the existence of these seams within the boundaries of the tenement with indicative coking coal qualities aligned with neighbouring mines.
Bowen has previously engaged a consultant to consolidate Rio’s exploration data into a geological model and recommend an exploration plan to advance Hillalong.
The consultant estimated an exploration target of between 61 million tonnes and 409 million tonnes from the Rangal and Moranbah coal measures for open pit and underground targets.
In morning trade, shares in Bowen Coking Coal were up 5.26% to $0.060.