MetroCoal – coal, fuels and energy in Australia

Queensland resources group Metallica Minerals has successfully raised A$1.5 million in seed capital for its MetroCoal subsidiary – paving the way for the potential float and ASX listing of a new Australian coal, associated fuels and energy focused company. The seed raising represents the first step in the establishment of the pure play coal and coal fuels company to develop seven coal exploration tenements covering a combined 4,000 km2 of the Surat Basin in southern Queensland.

The A$1.5 million raising was placed primarily through Southern Cross Equities and ABN Amro Morgans Sydney.  Metallica retains 84% of MetroCoal. “This strategy adds considerable value to Metallica, allowing it to focus on its core business as a nickel-cobalt developer in North Queensland while creating a real opportunity for MetroCoal to be a dedicated coal and energy company, to grow in the emerging Underground Coal Gasification (UCG) and Coal to Liquids (CTL) energy fuels sectors,” Metallica’s Managing Director, Mr Andrew Gillies, said.

The UCG process enables deeper coal deposits (150-350 m) to be converted into syngas (or coal gas – comprising mostly CO+H2) suitable for use as a fuel in power generation or the manufacture of petro-chemical products, including diesel.

Metallica previously outlined its intention to raise the seed capital to fund a 5,000 m drill program to assess the resource potential in specific target areas within the seven Surat Basin tenements.

Gillies said MetroCoal has a strong team in place, headed up by Mike O’Brien as CEO, who has considerable experience in the coal industry, and Neil Forbes as exploration manager. The Directors are David Barwick as Chairman, with John Haley, Michael Hansel and Gillies as Non-executive Directors.

“Most of the drilling is expected to be completed by late this year, to provide the confirmation of attractive large targets and expand the Surat coal and UCG-CTL project data base for a proposed MetroCoal IPO and ASX listing early in 2009, but would not rule out late 2008. Recent activity in the Australian energy sector in general, and in the UCG and CTL sector in particular, has reinforced Metallica’s view that MetroCoal’s projects which are underlain by a vast area of coal strata, can – in addition to conventional coal mining – form the foundation of a worldclass petrochemical industry in the Surat coal basin, producing clean diesel, other fuels and chemical products,” Gillies said.

“To deliver this strategy, MetroCoal will in the near term concentrate on proving up its coal deposits before locking in their respective development options – whether in export thermal coal, UCG-CTL, and or electricity production.” “Enduring high export coal prices will allow MetroCoal to continue to pursue opportunities for underground mining or, where possible, opencast mining in areas of the tenements where the coal seems are of appropriate thicknesses or are too shallow for UCG.”

Gillies said the $1.5 million MetroCoal raising would conserve Metallica’s existing cash reserves of over A$6 million and its share investment in Cockatoo Coal worth (at current prices) approximately A$22 million. “Metallica continues to look for opportunities to enhance and fund its core nickel projects and to divest or joint venture its non-nickel-cobalt mineral properties, such as its MetroCoal assets,” he said. “This in turn enables Metallica to maintain focus on its key Flagship NORNICO nickel project which is currently undergoing a feasibility study into becoming a long term nickel producer at approximately 8,000 t/y nickel.