Attila Resources Ltd. (ASX: AYA, AYAO) said Dec. 3 that its 70% owned subsidiary, Kodiak Mining Co., has agreed to terms for an option to acquire additional coal leases at what is known as the Seymour Property, which is about 3.5 kilometers south of its existing Kodiak Coking Coal Project in Alabama.
The Gurnee Property and the Seymour Property together make up the Kodiak Coking Coal Project. The Gurnee Property hosts an 81 million-tonne inferred Joint Ore Reserves Committee (JORC)-compliant resource in the Atkins and Coke coal seams, both of which outcrop on the Seymour Property. Attila will have the option to secure the mining rights to up to four coal seams which are found throughout the Seymour Property.
The uppermost of these seams, the Upper Thompson, underlies the central and eastern portion of the property, with the next lowest, the Coke and Atkins seams, underlying the major portion of the property. The lowest seam, the Big Bone, underlies the entire property. All beds dip to the southeast into the Daily Basin, a sub-unit of the larger Cahaba Basin within which the property lies. All beds with the exception of the Big Bone seam have been surface mined along the majority of their outcrop with the resultant highwalls providing sites for the development of low cost underground mines, Attila noted.
Approximately 75 coal bed methane (CBM) wells and 9 diamond core holes are located on the Seymour Property. Also, data exists from historic prospecting and sampling along the seams’ outcrops. Although the geophysical logs from the historic CBM wells and the geologic logs of the historic diamond core drill logs provide extremely useful information when assessing the thickness of the individual coal seams, further diamond hole core drilling is needed in order to estimate a JORC-compliant resource.
The coal appears to be of a high quality as determined from historic drilling and prospecting, with washed coal having a low ash and sulfur content and high fixed carbon content, making it suitable for export metallurgical markets or in blending for domestic markets, the company said.
The Atkins, Coke and Upper Thompson seams typically range in thickness between 0.75 meters to 2.1 meters on the Seymour Property, with averages in the range of 1.0 meters to 1.6 meters; these are slightly thicker than the same seams on the Gurnee Property. Based on the historical drilling data available from the Seymour Property and from adjacent properties, Stagg Resource Consultants has determined that the Seymour Property contains an exploration target in these three seams in the combined range of 42 million to 48 million tonnes of hard coking coal.
Based on the historical drilling data that is available, Stagg has determined that the Seymour Property contains an exploration target in the Big Bone seam of the order of up to 45 million tonnes. This seam, which has a slightly higher ash content than the typical ash content of the Gurnee seams of about 6%, is considered to have longer term potential for use as a blend in a hard coking coal product. This seam typically ranges in thickness between 2 and 3 meters. A detailed drilling program will be undertaken to further assess the quality of the coal and define a resource to JORC standards.
Stagg has determined that the quality of washed coal on a dry basis from the Atkins, Coke and Upper Thompson seams is likely to be in the range of 3% to 8% ash, 0.3% to 0.9% sulfur, 33% to 37% volatile matter, 55% to 61% fixed carbon and 7,900 to 8,100 kcal/kg heat content. Although there is extremely limited data regarding the Free Swelling Index (FSI) and fluidities of coal from these three seams, it is Stagg’s opinion, based on knowledge from surrounding areas, that FSI levels in the range of 6 to 9 are likely to be typical, with fluidities likely to be in the range of 15,000 to 30,000 DDPM over much of the property. The quality of the washed coal from the Big Bone seam is also very good based on the limited data available. Detailed studies of the Big Bone coal quality and washability will be undertaken to establish its market niches, Attila said.
Option is worked out with RGGS Land & Minerals
Attila’s 70% owned subsidiary, Kodiak Mining, has agreed the key terms to enter into an option agreement to lease the underground mining rights to the Atkins, Coke, Upper Thompson and Big Bone coal seams on an approximate 4,000 acre property from RGGS Land & Minerals Ltd. LP, which currently hs an agreement with Attila for its Gurnee Property.
The key agreed terms for the option on the Seymour Property are as follows:
- Upfront option fee of US$100,000;
- Two-year option to complete a minimum of US$500,000 worth of exploration in first year;
- Exercise of option at US$300,000;
- Term of the lease: thee-year rolling terms until exhaustion of any discovered coal reserves subject to certain minimum production milestones per three-year term; and
- Royalty of 8% on net coal sales with an upfront payment of US$25,000 and minimum monthly payment of US$5,000 per month for each coal seam leased.
Attila expects to complete this transaction including signing of the formal option agreement when its senior management are in the U.S. in the immediate term.
As part of the Seymour acquisition, Attila has also entered into formal consultancy agreements with its joint venture partner, TBL Metallurgical Resources, and its key personnel in relation to the Kodiak Coking Coal Project. In addition to the provision of key services to ensure the success of the Kodiak Coking Coal Project, the agreements provide for milestone payments of up to US$1m each upon the achievement of key milestones linked to the Kodiak Coking Coal Project. The maximum amount payable for these milestones is US$4m. The milestones include the conversion of resources into measured and indicated categories on either of the Seymour or Gurnee properties, Attila releasing a definitive feasibility study, the commencement of mining and washing of coal from the Kodiak Project and also annualized production of 250,000 saleable tonnes of hard coking coal from the Seymour or Gurnee properties.
Attila said it also has agreed to pay an introduction fee for further coal lease acquisitions in Alabama upon acquisition and delineation and determination of a measured and indicated resource.