Mining Projects Group (ASX: MPJ) is a minerals exploration company, exploring for Australia for bulk commodities. The company also holds investments in resource based companies with the potential for high growth.
Mining Projects Group in transformative deal to acquire Queensland coal assets
In snaring two coal tenements near Kingaroy in Queensland with existing rail infrastructure dissecting the Exploration Permits, this transaction should set MPJ alight if other Queensland coal discoveries in the same Basin are any guide. Existing cash + liquids provide insurance for the stock.
Mining Projects Group (ASX: MPJ), fresh from raising almost $1 million, has found its mark in Queensland and will acquire two coal projects near Kingaroy, prospective for thermal and soft coking coal.
MPJ has signed a binding heads of agreement to acquire 100% of an entity that has filed two Exploration Permits for Coal applications (EPCAs) north and east of Kingaroy, Queensland.
EPC 2527 & EPC 2528 are located approximately 170 kilometres west of Brisbane. The tenements combined area covers 1,030 square kilometres with existing rail infrastructure running through the tenements.
Consideration for the acquisition is $1 million split into payments at various stages.
A non-refundable deposit of $20,000 will be paid on execution of the HoA and $80,000 to be paid on completion of the acquisition of Delcarmen.
Other key terms:
- 12,500,000 performance shares will be issued on completion of the acquisition of Delcarmen, each of the performance shares will convert to an ordinary fully paid share in the Company upon the later of completion of the acquisition of Delcarmen or the grant of EPCA 2527;
- $200,000 to be paid on the later of completion of the acquisition of Delcarmen or the grant of EPCA 2527;
- 12,500,000 performance shares will be issued on completion of the acquisition of Delcarmen, each of the performance shares will convert to an ordinary fully paid share in the Company upon the later of completion of the acquisition of Delcarmen or the grant of EPCA 2528;
- $200,000 to be paid on the later of completion of the acquisition of Delcarmen or the grant of EPCA 2528;
- A milestone payment of $250,000, satisfied through the issue of fully paid ordinary shares MPJ shares, based on a 30 day VWAP, to be issued following an announcement by MPJ of a JORC indicated resource exceeding 100 million tonnes of coal within the EPCAs.
Peregrine Corporate, who managed the transaction, will receive 5,000,000 fully paid ordinary shares in MPJ as well as an attaching option with the same terms as the options issued as part of the recently completed rights issue.
In addition 5,000,000 options will be issued to Merchant Group Pty Ltd for its role in introducing the project. These options shall have an exercise price of $0.02 and an expiry date of 28 February 2013.
Post the deal, MPJ will have an issued capital of 179.1 million shares with a further 84.6 million (Feb 13/$0.02) options.
Prospectivity
An Independent study indicates MPJ's EPCA area has demonstrated potential for high energy thermal coal and semi-soft coking coal.
The EPCA's are in the Tarong Basin which is close to the Surat but further east.
The early study of the geological prospectivity of the EPCA’s suggests that the area demonstrates potential for high energy thermal coal as well as semi-soft coking coal, primarily located within the Triassic-age Esk and Gayndah Formations.
The tenures underlie several formations in the Triassic Esk Basin or Esk Trough, several of which are prospective for finding coal deposits. The three most explored units, in descending stratigraphic order, are the:
- Tarong Beds;
- Esk Formation; and
- Gayndah Formation
Significant coal discoveries have been made in the the Triassic Esk Basin or Esk Trough Basin which include Teck's (NYSE:TCK) Kunioon deposit and Cockatoo Coal's (ASX:COK) Taabinga deposit.
MPJ’s first steps post acquisition will be to engage an independent consultant to develop a conceptual target and initial drill program for the company.
Capital raising
The Company intends to raise a further $500,000 via a private placement of up to 25,000,000 fully paid ordinary shares in MPJ at $0.02 cents per share to sophisticated investors to provide further working capital.
The terms of the issue will be the same as the shares offered under the recently completed rights issue. As such a free attaching option will be issued with each share subscribed in the placement, each attaching option having an exercise price of $0.02 and an expiry date of 28 February 2013.
Analysis
If other Queensland coal deposits in the same Basin and Trough as MPJ's two EPCA's are any guide, then this transaction is transformative and MPJ has significant upside potential from pre-announcement valuation levels.
Significant coal discoveries, deposits and mines in the the Triassic Esk Basin or Esk Trough Basin include:
- Teck's (NYSE:TCK) Kunioon deposit with measured open cut resource of 435 million tonnes of thermal coal
- Bowen Energy's (ASX:BOW) Cooyar deposit (both send coal to Tarong Power Station),
- Rio Tinto's (ASX:RIO) Yarraman deposit just south of Tarong power Station with measured open cut of 54 million tonnes of thermal coal
- Cockatoo Coal's (ASX:COK) Taabinga deposit with measured open cut of 35 million tonnes of thermal coal
MPJ also holds investment positions in other listed companies including a holding of 9.01 million shares in West Wits Mining.
Together the cash and investments held by MPJ was worth $2.43 million at 31 December 2011 with no debt. On this measure alone (at $0.02), MPJ is trading around cash backing of $0.019 - valuing the new Queensland coal assets at minimal amount.
This provides a significant opportunity for investors that are fleet of foot.
The latest EPCAs to be acquired, which an external report indicates have "potential for high energy thermal coal and semi-soft coking coal" - provide a catalyst for value addition from current share price levels.
The tenements provide MPJ with a handy 1,030 square kilometre footprint, within a coal Basin with coal discoveries, deposits and mines with existing rail infrastructure dissecting the tenements and just 170 kilometres from Brisbane. Another significant plus point for the EPCA's.
In all, a very handy pick up for the interestingly named Mining Projects Group. With delineation of an Exploration Target and initial drill program, and a plan to add to its coal exploration portfolio, there are plenty of catalysts ahead for this company.
