Coal in Mongolia has been a hot topic recently with major news sources reporting on the ongoing battle amongst explorers to develop part of Tavan Tolgoi, regarded as one of the largest coking coal deposits on the planet. About a week ago, Mongolia gave the thumbs-up to Shenua, a coal maker in neighboring China, to control 40% of the project. Peabody (NYSE:BTU), the king of coal miners in the United States will hold 24% with a Mongolian-Russian consortium being awarded the remaining 36%.
The decision came as a bit of a shocker as vying companies included some of the largest energy companies in the world as well; entailing Vale (NYSE:VALE), Xstrata (out of London, England) and ArcelorMittal (also from London).
Equally important, the battle for developing the property underscores the importance that the emerging country of Mongolia and its resources as it tries to gain a larger industry foothold compared to neighboring -- and the much larger -- countries of China and Russia. And why not? After all, Mongolia’s estimated undeveloped world-class deposits are valued at $1.484 trillion according to the Mongolian Golomt Bank Valuation of January 2010.
While not typically mentioned with the aforementioned big cats of the energy industry, Vancouver-based Lucky Strike Resources Ltd. (TSX-Venture:LKY) is looking to broaden its own footprint by tapping into the coal-rich Mongolian land.
While not exactly chock-full of projects presently, Lucky Strike has been aligning themselves for growth with solid additions to their management team and Board of Directors while also securing finances. At the end of May 2011 a $2.4-million private placement was completed putting cash on the books for the Company.
Today, Lucky Strike announced that has signed Definitive Agreements with five private Mongolian companies to acquire 80 percent interest in six mining exploration licenses and coal properties located within a part of the Choir-Nyalgia coal basin approximately 175 kilometres southwest of Mongolia's capital city of Ulaanbaatar.
It’s considered a bargain deal as the stake was held by Gulfside Minerals Ltd (TSX-Venture:GMG) as part of a $22-million deal that was later revised, but Gulfside was unable to secure funding. Per the usual, the acquisitions are subject to due diligence and a number of approvals still at this point.
The properties are formidable, comprised of contiguous land of 13,096 hectares (131 sq. km) and are located approximately 170 km from the Trans-Mongolian Railway. For the purchase, Lucky Strike must "make total cash payments to the Vendors of US $5.8 million, subject to adjustment, by March 31, 2012, to acquire 80% interest in the CN Coal Properties, and to commit an aggregate of $2.5 million U.S. in exploration expenditures. Aggregate non-refundable deposits of U.S. $100,000 were paid to certain of the Vendors on the execution of the Definitive Agreements."
The NI 43-101 estimates the ranges of preliminary potential tonnages between 159 to 178 million tonnes of ASTM lignite thermal coal within the 2,156 hectares represented by the three mining exploration license areas through a study conducted by Gulfside.
Shareholders are apparently relishing the news of the acquisition. Shares of Lucky Strike closed up $0.02 at $0.72 on the day.
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