METROCOAL LIMITED A.C.N. 117 763 443
EPC 1164 “Wandoan West”
SURAT COAL PROJECT
ANNUAL REPORT FOR THE SEVENTH YEAR PERIOD 12/12/2013 to 11/12/2014
TENEMENT HOLDER: METROCOAL LIMITED
MANAGER: METROCOAL LIMITED
AUTHORS: N. VILLA
MAP SHEETS: 1: 250 000 Roma SG55 12 1: 100 000 Wandoan 8845, Guluguba 8945 COMMODITIES: COAL
GEOGRAPHIC COORDS: 26° 12'S / 149°48'E
DATE: 12 January 2015
TABLE OF CONTENTS
1. 1. SUMMARY ...... 4 2. INTRODUCTION ...... 5 3. LOCATION, ACCESS & SETTING ...... 6 ENVIRONMENTAL CONSIDERATIONS ...... 6 Endangered Regional Ecosystems ...... 7 Other Environmentally Sensitive Areas ...... 7 Heritage Sites ...... 8 Non-indigenous Heritage ...... 9 RECENT MINING HISTORY AND COAL UTILISATION ...... 10 4. TENURE ...... 11 TENEMENT RESTRICTIONS ...... 12 NATIVE TITLE ...... 12 OVERLAPPING COAL SEAM GAS TENURE (PART 711 OF THE MRA)...... 12 RELINQUISHED SUB-BLOCKS ...... 12 5. GEOLOGICAL SUMMARY ...... 13 6. PREVIOUS EXPLORATION ...... 19 7. WORK COMPLETED BY METROCOAL IN THE SEVENTH YEAR OF TENURE ...... 20 COMPLIANCE STATEMENT FOR PROGRAM OF ACTIVITIES...... 20 2014 Drilling Program ...... 20 Planning...... 20 Landholders ...... 20 Cultural Heritage ...... 21 Environmental Management Plan - Site Works and Rehabilitation ...... 21 Gas Management Plan ...... 22 Drill Rig ...... 22 2014 Results ...... 23 Geological Model & Resource ...... 23 Economic Potential of EPC 1164 Wandoan West ...... 23 8. PROPOSED EXPLORATION PROGRAMME FOR YEAR 8 ...... 24 9. REFERENCES ...... 25 10. APPENDICES & ENCLOSURES ...... 26
Annual Report 1/12/14 EPC 1164 “Wandoan West” P a g e | 2
Appendix 1 ...... 26 Bundi Geological Model ...... 26 Appendix 2 ...... 27 Environmental Permit ...... 27 Enclosure 1 ...... Error! Bookmark not defined. Drill Hole Plan ...... Error! Bookmark not defined.
Note:
In accordance with Section 13B(c) of the Mineral Resources Regulation 2003, the program of activities for the permit was complied with during the reporting period. Compilation of all geological information and field visits are listed in the Program of Works for Year 3. Expenditure on the tenement has been met.
Annual Report 1/12/14 EPC 1164 “Wandoan West” P a g e | 3
2. SUMMARY
MetroCoal Ltd holds a 100% interest in Exploration Permit for Coal (EPC) 1164 ‘Wandoan West’, which forms part of the Surat Project along with, EPC 1251 Wandoan West 2 , EPC 1165 Columboola, EPC 1166 Dalby West, EPC 1167 Roma North, EPC 1609 Wandoan West 3 and EPC 2234 Wandoan West 4. MetroCoal Ltd is a listed company on the ASX (Code MTE) with Balanced Property Pty Ltd as the majority shareholder at the time of this report. The tenement is managed by MetroCoal Ltd.
The Surat Project lies at the northern end of the Surat Basin in South East Queensland. MetroCoal is targeting the Juandah and Taroom Coal Measures within the Jurassic Walloon Sub-group. These coal measures contain all known economic coal deposits known in the Surat Basin. The tenement strategically covers the Juandah Coal Measures immediately down dip of the identified resources of the Wandoan Deposits, Elimatta and Woori (nee Guluguba) Deposits.
Wandoan West EPC 1164 consists of 215 sub blocks located in an arc south west of Wandoan. The tenement strategically covers the Juandah Coal Measures at or about 100 to 150m depth immediately down dip of the identified resources of the Wandoan deposits. The tenement is non-contiguous in shape, but ideally augments EPC 1251 Wandoan West 2 and EPC 1609 Wandoan West 3, and these tenements are explored in conjunction.
MetroCoal’s exploration philosophy with respect to these tenements is to identify coal seams suitable for conventional mining. The objective of the seventh year’s work was to further develop the coal resource model(s) and potential mining layout for the future underground longwall mining.
Year 7 (current year), saw no field program take place however the integration of the previous year’s field studies and data comprised the main activities for the current year. The overall purpose of last year’s program is to work toward the submission of an Environmental Impact Statement and Mining Lease Application.
MetroCoal will continue to focus on the development of the Kogan and Macalister Seams which are proving to constitute the key seams for the potential mine.
The project area is located 20km from the Wandoan rail head and proximal to the future proposed expansion of the Queensland Rail Service (in this case the Surat to Gladstone Link) and associated infrastructure which would enhance the economic viability of coal resources within the permit area.
Annual Report 1/12/14 EPC 1164 “Wandoan West” P a g e | 4
3. INTRODUCTION
MetroCoal Ltd holds a 100% interest in Exploration Permit for Coal (EPC) 1164, Wandoan West. The tenement is located proximal to other resources in the Surat Basin and covers the highly prospective Juandah and Taroom Coal Measures.
EPC 1164 was granted on the 12th December 2007 for a period of three (3) years and in 2010 it was extended for a further 2 years. It has been granted a further 5 years, with this current year being the 7th year of exploration and development. EPC 1164 forms the Surat Project along with EPCs 1166 Dalby West, 1167 Roma North and 1251 Wandoan West 2, EPC 1609 Wandoan West 3 and EPC 2234 Wandoan West 4. (Columboola EPC1165 has since been disassociated with the Surat Project, as of mid-2011, and is now its own Project under the Columboola JV with SinoCoal).
Wandoan West was considered attractive for exploration as it covers the down dip extensions of the sub cropping Juandah Coal Measures identified at the Wandoan, Elimatta and Woori (Guluguba) Deposits.
Exploration work completed to date has been a literature review, data compilation, and 6 annual drilling programs, comprised of chipped and part core holes. A geological model has been established and resources of totals in Table 1 from with EPC 1164, EPC 1251 and EPC 1609 (Granted 2012).
Table 1
MTE Resources (Mt) Reserves Applicable Project Ownership Indicated Inferred Total (Mt) JORC
Bundi (inc. Juandah) 100% 296 1705.6 2001.6 2012
Columboola 49% 242.6 1515.0 1757.6 2012
Goombi 49% 4.9 13.8 18.7 26.2 2004
Dalby West 100% 520 520 2004
Norwood 100% 156 156 2004
TOTA L (Mt) 543.5 3910.4 4453.9 26.2
Annual Report 1/12/14 EPC 1164 “Wandoan West” P a g e | 5
4. LOCATION, ACCESS & SETTING
EPC 1164 is located in a north west trending arc 15km south west of Wandoan on the north side of the Warrego Highway and Western rail link.
The nearest railway is located within 15 km which connects to the Brisbane and the proposed Surat Basin Railway. This will enable a rail link to the Port of Gladstone for potential future exports.
The average rainfall as recorded nearby at the Wandoan Post Office is 658.1mm per annum. The mean average temperature is 27.1°C which ranges from a July monthly average of 19.3°C through to a high with the January monthly average of 33.2°C.
Pastoral activities are mostly cattle grazing, opportunistic dry land cropping and minor forestry ENVIRONMENTAL CONSIDERATIONS
An independent tenement report by ELP has been completed to look at tenement status including available environmental documentation. Searches of the registers maintained by the QME in accordance with the Mineral Resources Act and the Department of Natural Resources and Mines (DNRM) in accordance with the Environmental Protection Act were conducted. The DNRM was consulted to clarify issues where relevant.
The Wandoan West tenure holds Environmental Authority (EA) EPVX00801113 as of 11th June 2013.
Environmental Authority and its conditions for EPC 1164 are documented in Appendix 2
Annual Report 1/12/14 EPC 1164 “Wandoan West” P a g e | 6
Figure 1: Location of the EPC 1164
Wondaree h j 1,872
1,866 1,867 1,868 1,870 1,871 1,801 o p l 1,869 WANDOAN Mount Organ Juandah q r
26° 10' S w x Wandoan Creek
b c Creek
1,938 1,939 1,940 1,941 1,942 1,943 1,944 1,873 EPC1164 p
EPC1164 u q
Road w
Mooy ouee Peaks BRISBANE CHARLEVILLE d Guluguba Lucky Downs Mount Lawton Taroom Horse Creek k Conloi 2,010 2,011 2,012 2,013 2,014 2,015 2,016 1,945 l Creek
LeichhardtHighway r
Yuleba 26° 20' S Mount Combabula Woleebee Woleebee Creek
Giligulgul 2,085
2,082 2,083 2,084 Jackson Wandoan 2,086Road 2,087 2,088 2,017
150° 00' E
149° 30' E 149° 40' E 149° 50' E 0 2 4 6 8 10 Km Block and sub block information from "Charleville/Brisbane" METROCOAL LIMITED Block Identification Map Series B (1:1,000,000) 1:250,000
Cairns EPC1251 WANDOAN WEST 2 Townsville Mt Isa SUB BLOCK Rockhampton LOCATION MAP BRISBANE
0 500Km COMPILED BY N. FORBES MAR 08 SCALE 1: 250,000 FIGURE DRAFTED BY K.J.CORRIE MAR 08 Proj.:LATLONG GDA94 QUEENSLAND 1 REVISED DWG No : INDEX MAP
Endangered Regional Ecosystems
Endangered Regional Ecosystems (EREs) are described in Sattler and Williams (1999) "The Conservation Status of Queensland Bioregional Ecosystems" as well as additional information and surveys conducted by the Queensland Herbarium. Such definitions were required following the proclamation of the Vegetation Management Act 1999. Endangered regional ecosystems are "Category B Environmentally Sensitive Areas" in the Codes of Environmental Compliance for Exploration, Mineral Development and Mining Projects for Level 2 Code Compliant Activities. For exploration projects, activities involving machinery cannot be undertaken in, or within 500 metres of an ERE. EPC 1164 has several areas and these constraints are not unusual for exploration permits in Queensland and are not anticipated to be a major impediment to exploration.
Other Environmentally Sensitive Areas
Cherwondah, Juandah, Gurulmundi, Hinchley, Mount Organ and Dinoun State Forests fall within the boundaries of this EPC. State Forests are a “Category C Environmentally Sensitive Area” under the Code of Environmental Compliance. Before carrying out any exploration activities in a Category C environmentally sensitive area, consultation must occur with the relevant administering body and the DERM – Environment.
There is also a Nature Refuge reserved for the proposed declaration of Shannon (Conloi) Nature Refuge. Nature Refuges are also a “Category C Environmentally Sensitive Area” in the Code. Before carrying out any exploration activities in a Category C environmentally
Annual Report 1/12/14 EPC 1164 “Wandoan West” P a g e | 7 sensitive area, consultation must occur with the relevant administering body and the DERM – Environment. Figure 2: DNRM Environmentally Sensitive Areas
Heritage Sites The Aboriginal Cultural Heritage Act 2003 (“ACH Act”) commenced on 16 April 2004 and binds all persons, including the State. It aims to provide recognition, protection and conservation of Aboriginal cultural heritage, and it should be noted that Aboriginal cultural heritage must be recognised on land, regardless of whether or not native title has been extinguished. Section 23(1) of the ACH Act states that a person or company carrying out an activity must take all reasonable and practicable measures to ensure that the activity does not harm Aboriginal cultural heritage. Penalties apply for causing unauthorised harm. This applies whether or not such places are recorded on the Aboriginal Cultural Heritage Register and whether or not they are located in, on or under private land. Aboriginal cultural heritage is also protected even if the DERM has no records of it.
Guidelines have been developed which outline the responsibilities and a Duty of Care framework known as the Cultural Heritage Duty of Care Guidelines (“DOCG”) for the manner in which a person or company undertakes their activities on all land. There is no offence in not following the DOCG, although complying with the guidelines affords strict compliance with the cultural heritage duty of care.
MetroCoal (and the other tenement holders) should refer to the DOCG prior to conducting exploration within their tenements. If, following a due diligence assessment of the area, MetroCoal or its operators believes that their exploration activities may impact on Aboriginal cultural heritage, then they could consider commencing consultation with the relevant Aboriginal Party(s). An Aboriginal Party is defined under the ACH Act as the native title party for the area.
Annual Report 1/12/14 EPC 1164 “Wandoan West” P a g e | 8
An informal agreement or a Cultural Heritage Management Plan (“CHMP”) can also be developed between MetroCoal and the Aboriginal Party(s) if deemed necessary.
Non-indigenous Heritage
Registered Places under the Queensland Heritage Act 1992 are classified as Category B ESAs in the Codes of Environmental Compliance for Exploration and Mineral Development Projects for Level 2 Code Compliant activities. For exploration projects, activities using machinery cannot be undertaken in, or within 500 metres of a Category B ESA. In addition under the Code, exploration must not be undertaken within 100 metres of other historical, archaeological or ethnographic sites. There does not appear to be any non-indigenous heritage areas identified at time of report.
Annual Report 1/12/14 EPC 1164 “Wandoan West” P a g e | 9
INDUSTRY BACKGROUND AND MARKET
MetroCoal is targeting attractive thermal coal resources suitable for conventional mining operations. The advent of new underground coal mining technologies, such as continuous miners means previously stranded coal resources can become economic.
At present there is no significant underground mining in the Surat Basin and identifying areas with seam continuity and competent roof and floor structure will be the key to a successful underground mining operation.
RECENT MINING HISTORY AND COAL UTILISATION
There are five medium scale open cut mines operating currently in the Surat-Moreton Basin: Wilkie Creek Mine was owned and operated by Peabody (Wilkie Creek) Pty Ltd now in care and maintenance and currently for sale. This mine produced a total of 2.5 mtpa of ROM raw coal that was beneficiated for both export and domestic steam coal utilization and is located 36 km west of Dalby.
Kogan Creek Mine owned by Aberdare Collieries, a subsidiary of CS Energy. The planned production is 3.5 mtpa raw steam coal for use at an onsite power station operated by CS Energy. The mine is run under contract by Geldings Contractors and is located 25km south East of Chinchilla.
Commodore Mine located 7 km to the south of Millmerran, supplying 3.3 mtpa raw coal to the Millmerran Power Station. This mining lease is held by Queensland Power Company and is currently operated under contract.
New Acland Mine, located 40 km north-west of Toowoomba, produces a beneficiated product for export as well as raw coal for domestic consumption. Current total raw coal ROM production is 3.8 mtpa.
Cameby Downs Mine, located 15 km east of Miles, is currently in development by Syntech Resources and will produce 2mtpa to the Rom with 1.4 mtpa railed to Brisbane for export.
There are another four coal resources under evaluation for open cut mining with the most notable being Glencore’s billion tonne plus Wandoan Deposit. Glencore are proposing a 30 Mtpa steaming coal operation with export through the Port of Gladstone. Other coal resources near development are Elimatta (Northern Energy Ltd) and Woori (Cockatoo Coal Ltd).
Annual Report 1/12/14 EPC 1164 “Wandoan West” P a g e | 10
5. TENURE
EPC 1164 is held and managed by MetroCoal Ltd (100%).
The Wandoan West tenement (EPC 1164) comprises 215 sub-blocks and was granted to MetroCoal Ltd on 12th December 2007 for a term of three years, expiring on 11th December 2010. A renewal was lodged in 2010 for the entire tenement and the renewal resulted in a further two years being granted. Since then, a further 5 years was applied for and granted.
Table 1: Sub blocks in EPC1164
REGION BLOCK A B C D E F G H J K L M N O P Q R S T U V W X Y Z Number
CHAR 1867 A F G H J K L M N O P Q R S T U V W X Y Z 21
CHAR 1868 F G H J K L M N O P Q R S T U V W X Y Z 20
CHAR 1869 F G L M N Q R S T U V W X Y Z 15
CHAR 1870 V 1
CHAR 1939 A B C D E F G H J K L M N O P 15
CHAR 1940 A B C D E F G H J K L M N O P 15
CHAR 1941 A B C D E F G H J K L M N O P R S T U X Y Z 22
CHAR 1942 A F G H L M N O Q R S T U V W X Y Z 18
CHAR 1943 Q R S T V W X Y Z 9
CHAR 1944 V 1
CHAR 2013 E 1
CHAR 2014 A B C D E G H J K N O P U 13
CHAR 2015 A B C D E F G H J K L M N O P Q R S T U W X Y Z 24
CHAR 2016 A B C F G H J L M N O P Q R S T U V W X Y Z 22
CHAR 2087 C D E K 4
CHAR 2088 A B C D E F G H J K M N O P 14
Total 215
A cash bond of $2,500 has been lodged with the Department.
Annual Report 1/12/14 EPC 1164 “Wandoan West” P a g e | 11
TENEMENT RESTRICTIONS EPC 1164 is mainly freehold land. Further restrictions are covered in the ‘Environmental Considerations’ section of this report.
NATIVE TITLE
OVERLAPPING COAL SEAM GAS TENURE (PART 711 OF THE MRA) If in the future a coal mining lease (“ML”) within any of the EPC is applied for, then Part 7AA of the MR Act applies. In brief, Part 7AA requires the ML applicant to consider the overlapping petroleum interests, and to negotiate with petroleum tenure holders. Coal exploration tenures currently overlapping petroleum tenures are tabulated in Table 2.
Table 2: Overlapping Petroleum Tenures Tenure Tenure Rec Type Number Status Principal Holder
1 PL 171 GRANTED ROMA PETROLEUM NL
2 PL 306 APPLICATION ARROW ENERGY LTD
3 PL 51 APPLICATION BG INTERNATIONAL (AUS) PTY LTD
4 PL 74 APPLICATION BG INTERNATIONAL (AUS) PTY LTD
5 PL 401 APPLICATION BG INTERNATIONAL (AUS) PTY LTD
6 EPP 768 GRANTED BNG (SURAT) PTY LTD
7 EPP 852 GRANTED PURE ENERGY RESOURCES LIMITED
8 EPP 810 GRANTED ARROW ENERGY LTD
9 EPP 747 APPLICATION ARROW ENERGY LTD
Table 3: Native Title Activity Tenement Claim No. Claimant Federal Court No.
EPC 1164 QC97/55 Iman People 2 QUD6162/1998
RELINQUISHED SUB-BLOCKS No Sub-Blocks have been relinquished to date.
Annual Report 1/12/14 EPC 1164 “Wandoan West” P a g e | 12
6. GEOLOGICAL SUMMARY
The Surat and Clarence Moreton Basins developed over part of the Tasman Geosyncline during the Early Triassic, Jurassic, and Cretaceous Periods. The Jurassic and Triassic were periods of continental deposition dominated by fluviatile sedimentation. Two marine incursions occurred during the Early Cretaceous. Contemporaneous andesitic volcanism was prevalent to the east during both the Jurassic and Cretaceous, and the sediments reflect that activity via a high volcanogenic provenance, and common pyroclastic rocks. The late Cretaceous and Early Tertiary were periods of erosion and deep weathering. The Oligocene and Miocene were marked by phases of intense basic volcanism around the eastern margins of the Basin. The present erosional remnant of the Basin consists of uplifted and tilted but relatively undisturbed Jurassic and Cretaceous strata overlying the Permo- Triassic sediments of the southern Bowen basin and Palaeozoic basement. The overall sedimentary development of both Basins was contemporaneous, and for the most part broad stratigraphic units can be correlated. However underlying tectonics and sources of sediment were different, which has resulted in differentiation of the sedimentary sequences, and in particular, the coal bearing sequences have different characteristics.
The sedimentary sequences of both the Basins vary in internal geometry and overall sediment provenance. The boundary between the basins accepted by most workers is marked by the position of the Kumbarilla Ridge, a basement ridge which controlled sedimentation to the east and west and is a logical divide between the two Basins. However, the sedimentary sequences in each Basin are differentiated in overall characteristics at significant distances from the dividing ridge, and the sequences at the position of the Ridge, are in practical terms similar to those sequences to the immediate west, within the Surat Basin. For this reason, and because the easternmost of EPC 1164 is located north west of the axis of the Kumbarilla Ridge, discussion in this report assumes that the relevant Basin, the Surat Basin and its particular stratigraphy applies to all of EPC 1164. This report focuses on the Jurassic Period, within which occur the coal depositions of interest. Description of the Surat Basin Jurassic stratigraphy of the area is contained in Figure 3.
Annual Report 1/12/14 EPC 1164 “Wandoan West” P a g e | 13
Figure 3: Surat Basin Stratigraphy
Annual Report 1/12/14 EPC 1164 “Wandoan West” P a g e | 14
In the Surat Basin, Jurassic sedimentation commenced with deposition of the Precipice Sandstone, Evergreen Formation, the Hutton Sandstone and Eurombah Formation. The reader is referred to descriptions of these units by Exon 1976. Lower fluvial sedimentation followed with deposition of the Walloon sub-group, divided into three units: the Taroom Coal Measures, Tangalooma Sandstone, and Juandah Coal Measures (Jones and Patrick 1981, Scott et al 2006). The Walloon Sub-group was followed by upper fluvial sedimentation of the Springbok Sandstone, Westbourne Formation and the Gubberamunda Sandstone (See Exon 1976).
Rocks deposited during the Middle Jurassic period contain coal seams of interest to coal explorers.
The Middle Jurassic Walloon Sub-group contains two episodes of coal deposition. The Juandah Coal Measures occurs at depths between sub crop and 200 metres in the areas of interest. The Taroom Coal Measures crop out to the north of the Juandah Coal Measures, and are positioned about 180 metres stratigraphically below the Juandah Coal Measures. EPC 1164 Wandoan West covers areas containing strata of both the Juandah Coal Measures and Taroom Coal Measures at depths suitable for both open cut mining and UCG exploitation.
The coal “seams” occurring within the two coal bearing Formations are commonly described as “coal packages”, as distinct tabular coal seams are relatively uncommon, with seam splitting and variable thickness a common feature. Often a “coal package” will contain a number of coal seams, and that “package” can be recognized on a basin wide scale. Scott et al 2006 have recognized seven packages within the Juandah Coal Measures, and three packages within the Taroom Coal Measures, which can be correlated over most of the Surat Basin explored to date.
Annual Report 1/12/14 EPC 1164 “Wandoan West” P a g e | 15
Figure 4: Typical Surat Basin Coal Seams
The Juandah Coal Measures contains, near the top of the Formation, a coal horizon which has been intensively drilled at a wide number of locations near the sub-crop. This seam is recognized geologically over a very wide area of the Basin, and is commonly referred to as the “Macalister Seam”. The preceding coal packages are characterized by much more common seam splitting, such that following exploration work with thousands of drill holes, no commercially interesting deposits have been located within these packages. The Taroom Coal Measures appear where best developed near Taroom, to contain only one package which has potentially economic characteristics. In other parts of the Basin, such as the Dalby-Acland region multiple seams with economic potential occur. At the present state of knowledge, these seams have not been definitely correlated with the “packages” identified by Scott et al 2007.
Annual Report 1/12/14 EPC 1164 “Wandoan West” P a g e | 16
Figure 5: Walloon Sub Group Stratigraphy
The coal packages in the Juandah Coal Measures were formed in an environment where fluvial channels were from time to time relatively stable, enabling thick peat deposition with only minor interruption by overbank mud deposits and minor pyroclastic deposition. The geometry of swamp areas was such that the areas of thick peat deposition formed “pod
Annual Report 1/12/14 EPC 1164 “Wandoan West” P a g e | 17 shaped” deposits between channels, and channel migration and relocation restricted peat swamp development over large areas. The plan shape of significantly thick deposits outlined by drilling is commonly of restricted areal extent, rather than the very wide extent characterizing the seams of the Bowen and Sydney Basins (See Figure 3).
The Taroom Coal Measures formed in a similar environment to the Juandah Coal Measures, with likely lower energy fluviatile activity. Three seams are consistently recognized occurring near the top of the Formation, the Auburn, Bulwer and Condamine coal packages.
Annual Report 1/12/14 EPC 1164 “Wandoan West” P a g e | 18
7. PREVIOUS EXPLORATION
Using the Queensland Mines & Energy (QME) ‘Interactive Maps’ (IRTM), MetroCoal identified ten (10) previous Exploration Permits (nee Authority to Prospect) for coal relevant to EPC 1164 Wandoan West. Using the QME’s QDEX’ database, MetroCoal identified thirty two (32) ‘open file’ company reports available for review. These reports are generally progress reports and relinquishment reports.
There has been significant exploration nearby at with the Wandoan Deposits, but exploration within EPC 1164 prior to MetroCoal involvement had, until recently, been sparse as historical exploration was targeting coal seams more amenable to surface mining.
MetroCoal identified several historic drill holes within or nearby EPC 1164 outlines and collar details are tabulated in appendices.
No historical resources were identified within EPC 1164.
Annual Report 1/12/14 EPC 1164 “Wandoan West” P a g e | 19
8. WORK COMPLETED BY METROCOAL IN THE SEVENTH YEAR OF TENURE
COMPLIANCE STATEMENT FOR PROGRAM OF ACTIVITIES
MetroCoal complied with the ‘Program of Activities’ as outlined in the EPC Application.
2014 Drilling Program
Planning Drill hole spacing was originally governed by the JORC Code and more specifically the “Estimating and Reporting of Inventory Coal, Coal Resources and Coal Reserves”, 2003. However since that time a new and more comprehensive edition has been released. Consequently resources developed calculated after December 2013 have been established according to “The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, (JORC) 2012. A copy of this code may be found here http://www.jorc.org/docs/JORC_code_2012.pdf
The 2014 program focussed on continuation of establishing coal resource model geared for underground coal mining within EPCs 1164,1251, 1609 and 2234, namely the Bundi project area. Collection of critical data from the previous year’s work, helped to establish and execute planning of the mine. Data collection in 2013 included gas desorption, coal quality, geotechnical characteristics and groundwater information.
Drill spacing was historically designed to infill drilling gaps providing enough data points to comply with the JORC Code drill hole spacing requirements for ‘Indicated’ Resource confidence.
Wireline logging has been used for current geological interpretation and seam correlation for modelling purposes.
Landholders
Due to the changes in legislation, all exploration activity in Queensland requires that a Conduct & Compensation Agreement (CCA) is in place prior to gaining access to property. Whilst the compensation approach is a continuation of the original voluntary compensation approach by MetroCoal, the format and layout has been dictated by Government resulting in significant changes. This has seen a large amount of effort and expenses arise, particularly from a legal perspective.
It was agreed that the set amount per drill site and its access was sufficient to be carried over from previous years where voluntary compensation by MetroCoal was offered. This amount was considered on the high side for coal, but resulted in facilitated access.
Some new gates were installed on some properties and tracks were fixed as other non- monetary compensation to the land holders.
Annual Report 1/12/14 EPC 1164 “Wandoan West” P a g e | 20
Cultural Heritage Environmental Licensing & Permitting (ELP) was engaged to manage the cultural heritage clearances for the program. ELP completed a Native Title search and all relevant claimants were identified and contacted.
No agreements for cultural heritage were entered into as exploration is still at a preliminary and early stage.
Cultural heritage surveys were completed before site works began to ensure MetroCoal Ltd complied with the Cultural Heritage Act (2004) requirements for appropriate due diligence.
Before earthworks commenced for pad preparation, the relevant cultural heritage groups were mobilised to inspect proposed drill pads to ensure no cultural heritage was affected.
Environmental Management Plan - Site Works and Rehabilitation An Environmental Management Plan (EMP) has been established based on the EPC Environmental License conditions. It has been augmented to comply with conditions outlined in the ‘Code of Conduct’ for Landholder explorer relations.
Equipment used was primarily a backhoe and grader, which were supported by a Body Truck and Tipper where necessary.
Drill sites were sited on flat easily accessible ground which would minimise earthworks required for site preparation. Sites were cleared using low impact machinery where possible. All loose timber, large and sharp rocks were cleared. If topsoil was removed, it was ‘windrowed’ on the downhill side of the drill pad for storage and to act as a sediment trap and diversion wall for small rain events.
Drill sumps were excavated using a backhoe. A portion of the drill cuttings were also excavated and disposed of in sumps, as per the EPC conditions.
The excavator re-filled the drill sumps, re-levelled the drill site and spread the topsoil with grass seed spread after scarifying the ground.
Regular future site inspections were planned to ensure rehabilitation is satisfactory and remediation work conducted if required.
Annual Report 1/12/14 EPC 1164 “Wandoan West” P a g e | 21
Gas Management Plan Coal Seam Gas is known to occur within the coal seams of the Surat Basin, and within the Bundi area, MetroCoal has identified coal seam gas as a hazard to drilling.
Primary well control was the use of drilling muds using the hydrostatic head pressure of the water column to control any coal seam gas. A Blowout Preventer (BOP) in the form of an annular bag was used as a secondary control measure when primary well control failed.
Approximately the first 10% of the proposed hole depth was cased with 4” (100mm) steel casing pressure cemented to establish a secure mounting point for the annular bag.
Gas was encountered in several holes and the gas management plan was activated and the gas was controlled.
At the cessation of drilling and Wireline logging, all holes were grouted with cement from top to bottom to seal off the hole and negate any future coal seam gas issues.
Drill Rig Drilling was completed by a multi-purpose UDR 650 drill rig supplied by Drillstralis, from Biloela. This drill rig could drill both rotary and HQ core to target depths and were ideal for this program.
Annual Report 1/12/14 EPC 1164 “Wandoan West” P a g e | 22
9. 2014 RESULTS
Geological Model & Resource
The geological model was established in 2008 by GeoConsult over EPCs 1164 & 1251 and has been expanded and improved over the ensuing 5 years as drilling data and a better understanding of the geological data accumulated over time. EPC 1609 was more recently been added to the Project in 2013 as was EPC 2234 in 2014.
The resource volume has been updated with an estimated Inferred resource of 1705.6Mt to include holes drilled during 2013. This also saw an Indicated resource increase to 296Mt with both resources being to JORC 2012 standards. Details of the model and resource are attached in Appendix 1.
Economic Potential of EPC 1164 Wandoan West
The EPC covers areas of known down dip extensions of the sub cropping Juandah Coal Measures identified within the resources of Wandoan and Elimatta. MetroCoal’s and historical studies and exploratory drilling indicates the prospective Kogan and Macalister Seams are present within the tenement and while too deep for open cast mining, they are at depths amenable for underground exploitation.
Underground Mining Drilling has delineated a consistent and correlated Kogan and Macalister Upper Seam which initially appears to be amenable for longwall underground mining. A stratigraphic Section is attached to this report showing the continuity and correlation of the Macalister Seam in Enclosure 2
Initial mine scoping studies indicate that the Bundi resource is sufficient to establish a 6 to 7 Mtpa underground mine providing a minimum of 5 Mtpa of export thermal coal for 20 years. Detailed mining studies have yet to be conducted and the feasibility will be is contingent on mining economics.
Annual Report 1/12/14 EPC 1164 “Wandoan West” P a g e | 23
10. PROPOSED EXPLORATION PROGRAM FOR YEAR 8
Year 8 will see modelling on the Bundi Resource Model to increase the correlation of data and reliability of the model. Wash models will be created along with further detailed mine plans.
Due to the downturn in the coal market, the voluntary Environmental Impact Assessment Study (EIS) has been withdrawn, placed in hiatus until such times that the market can support expenditure of that magnitude. Desktop studies, however, will be continued in preparation for a Mining Lease application and further mining feasibility in due course.
Furthermore, there exists potential for drilling to the south and east of the current Bundi resource that may extend and increase the resource in coming years.
Annual Report 1/12/14 EPC 1164 “Wandoan West” P a g e | 24
11. REFERENCES
1. EXON, N F ,1976 “Geology of the Surat Basin in Queensland” BMR Bull 166, 1976 2. JONES G.D., & PATRICK R.B.,1981 “ Stratigraphy and Exploration Geology of the North-eastern Surat Basin “ Journal of the Coal Geology Group of the Geological Society of Australia – Surat Moreton Basin Symposium Vol 1 part 4. 3. LEBLANG,G.M., RAYMENT, P.A., and SMYTH, M. 1981 “The Austinvale Coal Deposit – A Palaeoenvironmental Analysis” Coal Geology Vol 1 Part 4. MATHESON,S.G. (1991). “Geology and Coal Resources of the Moreton Basin, Queensland,” 5. SCOTT,S., ANDERSON,B., CROSDALE,P., DINGWALL,J., and LEBLANG,G. ( 2007) “Coal Petrology and Coal Seam Gas Contents of the Walloon Subgroup – Surat Basin, Queensland, Australia.” International Journal of Coal Geology Vol 70 6. Price Waterhouse Coopers “Linc Energy Limited, Underground Coal Gasification, ‘Industry Review and an Assessment of the Potential of UCG and UCG Value added Products.” May 2008, http://www.lincenergy.com.au/pdf/ucgreport-01.pdf 7. Australian Coal Gasification; http://www.australiancoal.com.au/cleantech.htm#gasification 8. Carbon Energy Pty Ltd : http://www.carbonenergy.com.au/home.php 9. Linc Energy Ltd; http://www.lincenergy.com.au/ucg.php 10. Cougar Energy Ltd; http://www.cougarenergy.com.au/index.html 11. Ergo Exergy Technologies, Inc; http://www.ergoexergy.com/ 12. UCG Partnership, UK ; http://www.ucgp.com/ 13. World Coal Institute: http://www.worldcoal.org/pages/content/index.asp?PageID=425 14. Syngas Refiner, USA: http://www.syngasrefiner.com/index.asp 15. The Coal Authority, UK; http://www.coal.gov.uk/resources/cleanercoaltechnologies/ucgintro.cfm 16. The Lawrence Livermore National Laboratory, USA; 17. UCG Engineering Ltd, UK http://www.coal-ucg.com/index.html 18. CSIRO: http://www.csiro.au/ 19. Milmerran Power Station: http://www.intergen.com/global/millmerran.php 20. Commodore Coal Mine: http://www.roche.com.au/Default.aspx?aCateId=965 21. Kogan Creek Power Station: http://www.csenergy.com.au/power_stations/ps_kogancreek.aspx 22. Kogan Creek Mine: http://www.golding.com.au/projects/civil_construction.php#Kogan_Power_Station 23. Syntech Resources (Australian Mining Holdings: http://mining.com.au/index.php?en_company 24. Golder Associates' Linc Energy’s Chinchilla Pilot Burn Environmental Report,” December 2005 25. Zerogen: http://www.zerogen.com.au/technologies/capture 26. BCG Energy Ltd; British Coal Gasification http://www.britishcoalgasification.co.uk/ 27. Friedmann, J 2007, “Fire in the Hole’ Science & Technology Review; https://www.llnl.gov/str/April07/Friedmann.html 28. QLD Government Mining Journal, Jan 15, 1923, DME Record 1971/17, BRN 58423. 29. Walker, L 1999, Underground Coal Gasification – A Clean Technology Ready for Development; http://www.australiancoal.csiro.au/pdfs/walker.pdf 30. Sasol; http://www.sasol.com 31. http://en.wikipedia.org/wiki/Fischer_Tropsch 32. Incitec Pivot Ltd: http://www.incitecpivot.com.au 33. Origin Energy Ltd: http://www.originenergy.com.au 34. QLD Mineral Resources Act 1989 http://www.legislation.qld.gov.au/LEGISLTN/CURRENT/M/MineralReA89.pdf 35. QLD Petroleum & Gas (Production & Safety) Act 2004 http://www.legislation.qld.gov.au/LEGISLTN/CURRENT/M/MineralReA89.pdf 36. Peabody: http://www.peabodyenergy.com.au/qld/wilkie-creek.html 37. Utilisation of Queensland’s Low and High Volatile Coals in Power Generation. By Dr Chris Spero Manager Engineering Technology – CS Energy, Brisbane 38. Qld Govt Publication “Utilisation of Walloon Coals for Power Generation”. Compiled by Ray Smith DNRM) 39. Coal Industry Review 2002-2003, 52nd Edition - Bureau of Mining and Petroleum Queensland 40. International Energy Agency: http://www.worldenergyoutlook.org/ 41. Register of Australian Mining 2004/05 42. QTHERM http://www.nrw.qld.gov.au/mines/coal/pdf/walloon_coal_6.pdf 43. Leblang 2007 Internal Correspondence. 44. Swarbrick, C.F.J., Grey, A.R.G., Exon, N.F. 1973 Injune Creek Group - amendments and an addition to stratigraphic nomenclature in the Surat Basin. Queensland Government Mining Journal LXXIV(856) p57-62 45. Queensland Coals 14th Edition, 2003, QLD DNRM 46. Queensland DME QDEX Exploration Reports https://qeri.dme.qld.gov.au/qeri/controller/Home
Annual Report 1/12/14 EPC 1164 “Wandoan West” P a g e | 25
12. APPENDICES & ENCLOSURES
Appendix 1 Bundi Geological Model JORC 2012
EPC 1164 Wandoan West
Annual Report 1/12/14 EPC 1164 “Wandoan West” P a g e | 26
Appendix 2 Environmental Permit
EPC 1164 Wandoan West
Annual Report 1/12/14 EPC 1164 “Wandoan West” P a g e | 27