METROCOAL LIMITED A.C.N. 117 763 443
EPC 1251 “Wandoan West 2”
SURAT COAL PROJECT
ANNUAL REPORT FOR THE FIFTH YEAR PERIOD 17/09/2012 to 16/09/2013
TENEMENT HOLDER: METROCOAL LIMITED
MANAGER: METROCOAL LIMITED
AUTHORS: N. VILLA
MAP SHEETS: 1: 250 000 Roma SG55 12, Chinchilla SG56 9
1: 100 000 Wandoan 8845, Guluguba 8945
COMMODITIES: COAL
GEOGRAPHIC COORDS: 26° 12'S / 149°48'E
DATE: 16 September 2013
TABLE OF CONTENTS
1. SUMMARY ...... 5 2. INTRODUCTION ...... 6 3. LOCATION, ACCESS & SETTING ...... 7 ENVIRONMENTAL CONSIDERATIONS ...... 7 Endangered Regional Ecosystems ...... 8 Other Environmentally Sensitive Areas ...... 8 Heritage Sites ...... 8 Non-indigenous Heritage ...... 9 4. INDUSTRY BACKGROUND AND MARKET ...... 10 RECENT MINING HISTORY AND COAL UTILISATION ...... 11 5. TENURE ...... 12 TENEMENT RESTRICTIONS ...... 12 NATIVE TITLE ...... 12 OVERLAPPING COAL SEAM GAS TENURE (PART 711 OF THE MRA) ...... 12 RELINQUISHED SUB-BLOCKS...... 13 6. GEOLOGICAL SUMMARY ...... 14 7. PREVIOUS EXPLORATION ...... 20 8. WORK COMPLETED BY METROCOAL IN THE FOURTH YEAR OF TENURE ...... 21 COMPLIANCE STATEMENT FOR PROGRAM OF ACTIVITIES ...... 21 2012 Drilling Program ...... 21 Planning ...... 21 Landholders ...... 21 Cultural Heritage ...... 21 Environmental Management Plan - Site Works and Rehabilitation ...... 22 Gas Management Plan...... 23 Drill Rig ...... 23 2013 Drilling Program Results ...... 24 Drill Hole Details & Locations ...... 24 Survey ...... 25 Coal Quality ...... 26 Drilling Production and Problems ...... 26
Annual Report 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 2
Geological Model & Resource ...... 1 Economic Potential of EPC 1251 Wandoan West 2 ...... 1 9. PROPOSED EXPLORATION PROGRAMME FOR YEAR 4 ...... 2 10. REFERENCES ...... 3 11. APPENDICES & ENCLOSURES ...... 4 Appendix 1 ...... 4 English Logs ...... 4 Appendix 2 ...... 5 Defect Logs ...... 5 Appendix 3 ...... 6 Drill Hole Survey Report ...... 6 Appendix 4A ...... 7 Core Photography ...... 7 Appendix 4B ...... 8 Core Photography ...... 8 Appendix 5A ...... 9 Wireline Logs - PDF Files ...... 9 Appendix 5B ...... 10 Wireline Logs – PDF Files ...... 10 Appendix 6A ...... 11 Coal Quality – WW43C ...... Error! Bookmark not defined. Appendix 6B ...... Error! Bookmark not defined. Coal Quality – WW45C ...... Error! Bookmark not defined. Appendix 7 ...... 12 Bundi Geological Model ...... 12 Environmental Conditions ...... 13 Enclosure 1 ...... 14 Drill Hole Plan ...... 15
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 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 3
Annual Report 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 4
1. SUMMARY
MetroCoal Ltd holds a 100% interest in Exploration Permit for Coal (EPC) 1251 ‘Wandoan West 2’, which forms part of the Surat Project along with, EPC 1164 Wandoan West , 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 Metallica Minerals 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 2 EPC 1251 consists of 19 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 1164 Wandoan West and these tenements are explored in conjunction.
MetroCoal’s exploration philosophy is to identify coal seams suitable for conventional mining. The objective of the fifth year’s exploration was to establish resources for future studies into underground longwall mining.
Year 5 (current year), saw six (6) boreholes of a ten (10) borehole program drilled within EPC 1251. These were for the purpose of resource definition, geotechnical data collection and groundwater baseline evaluation. The purpose being to work toward the submission of an Environmental Impact Statement and Mining Lease Application.
Exploration in Year 4 consisted of sixteen (16) part core holes totalling 3030.17m. The holes were completed as part of the Bundi Project and adjacent to EPC 1164. Furthermore, approximately 7 km of a 35 km 2D seismic program was conducted within EPC 1251.
Prior to this the field exploration in Year 3 consisted of two (2) part core holes WW43C and WW45C, totalling 568.30m. The holes were completed within the larger Bundi Project predominantly within the adjacent EPC 1164. The programme was successful in confirming areas of continuity of the Kogan and Macalister Seam(s) and increasing resource confidence. The Bundi Inferred resource of _ Mt was increased within EPC 1164 and 1251 in the third year of tenure.
MetroCoal will continue to focus on the Kogan and Macalister Seams which are proving to be continuous and correlated.
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 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 5
2. INTRODUCTION
MetroCoal Ltd holds a 100% interest in Exploration Permit for Coal (EPC) 1251, Wandoan West 2. The tenement is located proximal to other resources in the Surat Basin and covers the highly prospective Juandah and Taroom Coal Measures.
EPC 1251 was granted on the 17th September 2008 for a period of five (5) years and formed part of the Surat Project along with EPC1164 Wandoan West, EPC1165 Columboola, EPC1166 Dalby West, EPC1167 Roma North, EPC(A) 1609 Wandoan West 3 and EPC(A) 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).
EPC 1251 comprises 19 sub-blocks within the Charleville and Brisbane Blocks, and is spread over in an arc along the north eastern limb of the Mimosa Syncline (see Figure 1). The Surat Project lies at the north eastern end of the Surat Basin in South East Queensland.
Wandoan West 2 is located centrally 15km south west of Wandoan, and is accessed via the Wandoan Jackson Road and Bundi Road which run through the tenement. Wandoan West 2 is located on the Chinchilla SG56 9 and Roma SG55 12 1: 250 000 Map Sheets and the Wandoan 8845, and Guluguba 8945 1: 100 000 Map Sheets.
Wandoan West 2 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 (nee Guluguba) Deposits.
Annual Report 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 6
3. LOCATION, ACCESS & SETTING
EPC 1251 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 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 DNRM in accordance with the Mineral Resources Act and the DEHP in accordance with the Environmental Protection Act were conducted. The EPA was consulted to clarify issues where relevant.
The Wandoan West 2 tenure holds Environmental Authorities (EAs) for activity on EPC 1251 as of 11th June 2013. Previous to the current standing, the tenure had held Environmental Authority from 2012.
The current Environmental Authority for EPC 1251 is EPVX00801113, with Additional Conditions documented in Appendix 8.
Annual Report 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 7
Figure 1: Location of the EPC 1251
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 1251 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 State Forest areas have been identified within EPC 1251. Consultation with the regulating authority will need to be undertaken prior to accessing these areas. State Forests are classified as Category C ESAs in the Code of Environmental Compliance for Exploration and Mineral Development Projects for code-compliant (standard) activities. The legislation for State Forests is the Forestry Act 1959 which is administered by the DERM. Prior to carrying out activities in a Category C ESA, the relevant administering authority and the DERM must be consulted. Following consultation, additional conditions may be added to the EA.
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
Annual Report 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 8
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. 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 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 9
Figure 2: EPA Environmentally Sensitive Areas
4. INDUSTRY BACKGROUND AND MARKET
Annual Report 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 10
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 owned and operated by Peabody (Willkie Creek) Pty Ltd. 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 Xstrata’s billion tonne plus Wandoan Deposit. Xstrata 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 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 11
5. TENURE
EPC 1251 is held and managed by MetroCoal Ltd (100%) which at the time of this report is a majority owned subsidiary of Metallica Minerals Ltd (45.27%).
The Wandoan West 2 tenement (EPC 1251) comprises 19 sub-blocks and was granted to MetroCoal Ltd on 17th September 2008 for a term of five years, expiring on 16th September 2013.
Table 1: Sub blocks in EPC1251 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 1869 H J O P 4
CHAR 1870 L Q R W X 5
CHAR 1942 B C P 3
CHAR 1943 U 1
CHAR 1944 Q W 2
BRIS 1945 L R 2
CHAR 2016 D K 2
Total 19
A cash bond of $2,500 has been lodged with the Department. The required expenditure for year 3 was $30,000.
TENEMENT RESTRICTIONS EPC 1251 is mainly freehold land. Further restrictions are covered in the ‘Environmental Considerations’ section of this report.
NATIVE TITLE There is one current native title claim over EPC 1251. It covers the northern portion of the tenement and details are tabulated below in Table 3.
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
Annual Report 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 12
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 Federal Court Tenement Claim No. Claimant No.
EPC 1251 QC97/55 Iman People 2 QUD6162/98
RELINQUISHED SUB-BLOCKS No Sub-Blocks have been relinquished to date.
Annual Report 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 13
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 1251 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 1251. 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 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 14
Figure 3: Surat Basin Stratigraphy
Annual Report 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 15
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 1251 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 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 16
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 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 17
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 shaped” deposits between
Annual Report 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 18 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 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 19
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 1251 Wandoan West 2. 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 1251 prior to MetroCoal involvement has been sparse as historical exploration was targeting coal seams more amenable to surface mining.
MetroCoal identified several historic drill holes within or nearby EPC 1251 outlines and collar details are tabulated in appendices.
No historical resources were identified within EPC 1251.
Annual Report 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 20
8. WORK COMPLETED BY METROCOAL IN THE FOURTH YEAR OF TENURE
COMPLIANCE STATEMENT FOR PROGRAM OF ACTIVITIES
MetroCoal complied with the ‘Program of Activities’ as outlined in the EPC Application.
2012 Drilling Program
Planning Drill hole spacing was governed by the JORC Code http://www.jorc.org/jorc_code.asp and more specifically the “Estimating and Reporting of Inventory Coal, Coal Resources and Coal Reserves”, 2003.
The 2011 Drilling program focussed on establishing coal resources amenable for underground coal mining within EPCs 1164,and 1251, namely the Bundi project area.
Using historic exploration drill holes, available CSG Well data and MetroCoal’s 2010 drilling results, a grid of holes was designed. Drill spacing was designed to infill drilling gaps and provide enough data points to comply with the JORC Code drill hole spacing requirements for ‘Inferred’ 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.
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.
Annual Report 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 21
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 with industry best practice and conditions outlined in the ‘Code of Conduct’ for Landholder explorer relations.
Equipment used was primarily a 15 ton Excavator and a skid steer loader, which were supported by a Body Truck and Tipper. A grader was used for track repair.
Drill sites were sited on flat easily accessible ground which would minimise earthworks required for site preparation. Sites were cleared using a low impact rubber tyred skid steer loader. 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 an excavator. 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 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 22
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 Blow Out 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 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 23
2013 Drilling Program Results
A program comprising 6 drill holes was completed within EPC 1251 in the reporting period. Drilling totalled 568.30m, of which 393.45m was cored. The program was completed with the drill hole intersecting the interpreted Macalister Seam horizon on a drill spacing to enable resource estimation.
Drill Hole Details & Locations Drill hole location was designed to link together historic drill holes and recent Metrocoal drill holes to enable drill hole spacing to meet the JORC Code for Inferred resources.
Table 4: Drill Collar and Bore hole Table
Hole Site Date Drilling Casing Total Meters Property Project/Area Hole Type Easting Northing AHDD Number Name Completed Length Depth Cored
WW167C AI059 Ashley Downs EPC1251 4-Jun-13 Chip/Part Core 30.00 197.90 102.30 772498.16 7109504.35 283.52
WW168C AK055 WILLOISE EPC1251 10-Jun-13 Chip/Part Core 30.00 227.90 97.90 770802.30 7108940.56 312.72
WW169C AM063 WILLOISE EPC1251 22-Jun-13 Chip/Part Core 30.00 228.30 195.87 773218.79 7108121.45 295.99
WW171C AI055 Green Fields EPC1251 11-Jul-13 Chip/Part Core 30.00 210.10 110.00 770850.81 7109521.71 292.30
WW172C AI061 Ashley Downs EPC1251 21-Jul-13 Chip/Part Core 30.00 198.00 102.00 773292.25 7109472.40 280.36
WW173C AI057 Ashley Downs EPC1251 03-Aug-13 Chip/Part Core 30.00 228.80 126.30 771704.85 7109553.92 290.68
Figure 6: 2011 Drill Hole Locations
Annual Report 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 24
Survey All drill holes were to be surveyed in using a DGPS and referenced back to survey markers. Details of the survey are shown below in Table 5. Further information found in Survey Report in Appendix 3.
Table 5
Hole Number Site Name Property Project/Area Easting Northing AHDD
WW167C AI059 Ashley Downs EPC1251 772498.16 7109504.35 283.52
WW168C AK055 WILLOISE EPC1251 770802.30 7108940.56 312.72
WW169C AM063 WILLOISE EPC1251 773218.79 7108121.45 295.99
WW171C AI055 Green Fields EPC1251 770850.81 7109521.71 292.30
WW172C AI061 Ashley Downs EPC1251 773292.25 7109472.40 280.36
WW173C AI057 Ashley Downs EPC1251 771704.85 7109553.92 290.68
Annual Report 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 25
Wireline Logging
Wireline logging was completed for both holes drilled. Logging was completed by GEOLOG Pty Ltd (Geolog) utilising a calliper, dual density and gamma surveys for each hole. Sonic surveys were completed for both holes and Acoustic Scanner was run on some holes when the tool was available.
Ground conditions were generally good for wireline logging, but the driller had to ensure a clean hole, particularly in the clay rich sediments in Springbok Sandstone in the roof sequence. Wireline logs and LAS files are provided in the Appendix 5.
Groundwater The groundwater data was collected and analysed as part of the baseline study for the Bundi Project EIS. The aim for this portion of the project was to collect sufficient information on groundwater to be able to use it as a reference point for future operations and the impact (if any) that mining has on the groundwater. It is equally important to separate mining impacts versus impact from coal seam gas activities. Once collected, collated and included in the EIS, this will bring the project closer to MLA submission.
In order to monitor groundwater a series of installations had to be made containing vibrating wire piezometers and standard piezometers along with sampling wells and monitoring bores. The types of borehole installations are listed in Table 6.
Coal Quality Coal Quality analysis was completed by NATA accredited laboratories GeoConsult (Brisbane), PrepLab (Gladstone) and Bureau Veritas Laboratories (Brisbane). Coal qualities reflect what coal qualities nearby at the Wandoan Deposit and the Surat Basin in general. Original assay certificates are attached in Appendix 6.
Drilling Production and Problems
One UDR 650 drill rigs was mobilised in May. The 2013 drilling program in the Surat Project Area began and finished with one rig to complete each hole one by one. The holes would rotary chip to the marker horizon (Springbok Sandstone), after which the bit was changed and the rig would HQ core the remainder of the borehole. This occurred in all but 3 holes that were designated for Full HQ coring from surface for geotechnical testing purposes (see Table 6 next page).
The tenth bore hole was a fully chipped borehole used for groundwater monitoring during a pump out test. The purpose of this test was to determine recharge rates of the aquifer over 12 hours.
The benefit of a part core drilling program is all drill holes can be used for resource estimation and converted to reserve category. The compromise is increased cost per hole and also a reliance on the geological model and site geologist to accurately predict and execute the point on which to convert from rotary drilling to coring.
Gas management proved to be critical in terms of time and expense. The establishment of pressure cemented steel casing to fit an annular bag was, although expensive, critical to operations and safety. Additionally, coal drillers have had to develop an awareness of gas in coal seams as encountered at Bundi.
All drill holes are grouted at the completion of drilling.
Wet weather was virtually non-existent with the program being held during the dry season. Annual Report 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 26
Table 6
Hole Hole ID and Drilled Full HQ UCS Float/ Sink Coal Seam Formation Gas Gravel hole VWP Cemented Coal Wire Survey order order Type Comp DST Desorp. with PVC VWP*** Quality line Geotech Geotech Analysis DST standpipe log CMRR & PLT Sampling
1 AK055 HQ3 2 AI063 HQ3 3 AI059 HQ3 4 AI055 HQ3 5 AM063 HQ3 6 AM053 or HQ3 AM053(b)
7 Kogan and 3 formation AI057 HQ3 Macalister tests only
8 Kogan and 3 formation AI061 HQ3 Macalister tests only
9 AK053 Kogan and HQ3 Macalister
10 33435 PCD
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.
The previous Bundi Inferred resource of 1316.2Mt was estimated in 2012, spread across EPC 1164 and EPC 1251. There was also an Indicated resource of 245.8 Mt.
The resource volume has since been updated with an estimated Inferred resource of 1480.6Mt to include holes drilled in EPC 1251 drilled during 2013. This also saw an Indicated resource increase to 268.5Mt. Details of the model and resource are attached in Appendix 7.
This resource is in addition to the Juandah resource of 170 Mt reported in the 2009 Annual Report.
Economic Potential of EPC 1251 Wandoan West 2
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.
9. PROPOSED EXPLORATION PROGRAMME FOR YEAR 6
Year 6 will see exploration concentrating on the Bundi Resource with a 60 hole program within EPC 1164 and 1251 designed to increase the confidence of the inferred resource and in some areas improve to Indicated status.
Pre-feasibility studies have commenced at the time of report and will be completed in the fourth year. .
A voluntary Environmental Impact Assessment Study (EIS) has commenced and will be continued in preparation for a Mining Lease application if mining studies warrant further mining feasibility.
Drilling to the south and east of the current Bundi resource is also planned to extend and increase the Inferred resource.
Wide spaced drilling will commence in the ‘May’ project area which occupies the eastern third of EPC 1164/1251. Thirty holes based on a 3.2km offset grid are designed to establish Inferred resources.
Field activities will entail the following: 1. Rotary and part core drilling with wireline logging 2. Possible seismic survey 3. Geological modelling and resource estimation of coal seams 4. Coal Quality Analysis 5. Geotechnical Investigations 6. EIS – Groundwater Studies 7. EIS – Flora and Fauna Studies 8. EIS – Surface Water Monitoring
Annual Report 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 2
10. 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 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 3
11. APPENDICES & ENCLOSURES
Appendix 1
EPC 1251 Wandoan West 2
English Logs
Annual Report 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 4
Appendix 2
EPC 1251 Wandoan West 2
Defect Logs
Annual Report 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 5
Appendix 3
EPC 1251 Wandoan West 2
Drill Hole Survey Report
Annual Report 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 6
Appendix 4A
EPC 1251 Wandoan West 2
Core Photography
Hole
WW43C
Annual Report 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 7
Appendix 4B
EPC 1251 Wandoan West 2
Core Photography
Hole
WW45C
Annual Report 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 8
Appendix 5A
EPC 1251 Wandoan West 2
Wireline Logs - PDF Files
Hole
WW43C
Annual Report 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 9
Appendix 5B
EPC 1251 Wandoan West 2
Wireline Logs – PDF Files
Hole
WW166C
WW167C
WW168C
WW169C
WW170C
WW171C
WW172C
WW173C
WW174C
Annual Report 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 10
Appendix 6
Assay Certificates
EPC 1251 Wandoan West 2
Annual Report 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 11
Appendix 7
EPC 1164 Wandoan West & EPC 1251 Wandoan West 2
Bundi Geological Model
Annual Report 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 12
Appendix 8
EPC 1164 Wandoan West & EPC 1251 Wandoan West 2
Environmental Authority
Annual Report 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 13
Appendix 9
EPC 1251 Wandoan West 2
Point Load Testing Results
Annual Report 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 14
Enclosure 1
EPC 1251 Wandoan West 2
Drill Hole Plan
Annual Report 16.10.13 EPC 1251 “Wandoan West 2” P a g e | 15