PERTH (miningweekly.com) – Coal developer Hodges Resources was hoping to fast-track its growth after acquiring the issued share capital of a Kyrgyzstan-based, Australian-owned company.

The takeover target holds a 50% interest in an operational thermal coal mine, as well as additional coal prospects in Kyrgyzstan.

The operational opencut mine currently produces around 100 000 t within less than six months a year. The project has an exploration target of between 120-million and 160-million tonnes.

MD Mark Major said that Hodges’ first priority would be to undertake a technical review of the exploration targets, with the aim of converting them to the Joint Ore Reserves Committee (Jorc) standards. He added that would be followed by a full review to expedite near-term production expansion and cash flow potential.

“This previously mined asset will play an important part in Hodges development. It is our belief that we could see rapid development at this mine for minimal capital expenditure, given the existing infrastructure of the openpit and coal already at surface, and the roads, power and labour all available.”

Major added that an initial review of the project suggested that the mine could be scaled-up in the short-term and provide substantial free cash flow.

“The location project also works in our favour. With neighbouring China being the major consumer of thermal coal, we see our growth in line with this demand as well as the regional and domestic demand,” he added.

Under the terms of the transaction, Hodges would issue 65-million fully paid ordinary shares on completion of the due diligence, with a further 35-million ordinary shares issued on the delineation of a Jorc-compliant reserve of at least 50-million tonnes of mineable coal.

A further 50-million ordinary shares would be issued on the achievement of coal production and sales rates of at least 167 000 t over any four consecutive months of production, at an operating cost equal or less than $45/t in the first two years, or $40/t after the first two years.

A further 30-million ordinary shares would be issued if a Jorc-compliant indicated resource of at least 100-million tonnes, with a calorific value of no less than 6 000 t was delineated, and no more than 20% ash and 1% sulpur.

Another 30-million shares would be issued on the decision to mine being made in relation to this exploration deposit.