Hodges Resources Ltd, the Australian listed outfit, said it has reached an agreement with shareholders of Jaquar Ventures for US $ 70 million acquisition of a portion in the company, which has interests in coal in Botswana although the move is subject to due diligence.
The deal will see Hodges acquiring up to a 90 percent of the equity in Jaquar, a company that owns 100 percent of the Moiyabana Coal prospect.
The coal prospect is located within the central district of Botswana, approximately 70 km in a direct line to the operational Morupule mine and Colliery, which is the only operational coal fired power plant in Botswana.
In an update to shareholders and media this week, Hodges said it will pay US$20,000 for an exclusivity period in which to conduct due diligence until May 13, 2011.
“On election to continue, Hodges will have 18 months in which to explore the area of interest and determine if it is a viable project for the company,” it said, adding that it is limited to spending up to a maximum of US$7 million during this option period.
Jaquar Ventures prospecting licences PL93/2008 and PL94/2007 lie within the South East central Kalahari Subbasin of the Karoo Supergroup; 70 kilometers in a direct line to the Moruple Colliery and the Moruple South prospects located close to the town of Palapye.
This is another prospect that Hodges is currently conducting due diligence on.
Previously, another company, Shell Coal Botswana (Pty) Ltd, carried out basic coal exploration work over the general area, which consisted of reconnaissance drilling and geophysics.
Then in 2008 Jaquar Ventures drilled three boreholes in an area they acknowledged as prospective from the initial Shell exploration data.
On completion of the three boreholes and upon more analysis of the available Shell data, Jaquar commenced with a second phase of exploration in September 2009.
During the second phase of exploration Jaquar drilled around 1,200 m and undertook downhole wireline geophysical logging where possible.
In addition to this, coal seams that were greater than 0.60 m were sampled and analysed as were series of seams less than 0.60 m within the same carbonaceous sequence, as a single composite sample. Samples were transported to the Advance Coal Laboratory in South Africa for a coal quality analysis.
The work completed by the current owner has shown that the exploration target investigated is confined to an area of around 45 square kilometers of the 540 square kilometer prospecting licenses.
Analytika Holdings, a geological and mine consultant group based in Gaborone, Botswana, prepared a report on behalf of the vendor detailing the vendor’s exploration activities, local geology, summary of the laboratory result of the coal quality analysis, and developed a preliminary coal exploration target over a small area of Jaquar’s prospecting license. This data and report were verified and reviewed as suitable for defining preliminary exploration targets.
“The presence of encouraging drill intersections from previous explorers and the vendor demonstrate that significant mineable coal seams are located within the target area and over the entire prospecting areas.
Significantly the project areas have had minimal exploration and coal quality analytical work,” Hodges said.
The coal quality is variable, but raw qualities are suitable for domestic thermal markets, indicative of the areas’ coal fields. There is evidence within the laboratory test work that some of the coal could be upgraded to export quality coal.
The stated exploration target above and coal quality must be regarded as provisional indication of likely tonnages and qualities only.
In order to purchase the remaining interest in the company (to a maximum of 90 percent), Hodges will have 9 months from accepting the option to pay the resulting balance of the 18 month accumulated sum from the purchase price of US$70 million.
If Hodges elects not to continue with the option, the expenditure undertaken during the exploration period will be converted to shares within Jaquar at that point.
Hodges will also enter into a Loan agreement with the vendors and provide a Loan facility of US$3 million on initiation of the agreement. This loan will be repaid on the 18 month milestone or converted into shares of Jaquar.
Hodges has the exclusive right, until 13th May 2011, to conduct due diligence prior to entering into the binding agreement outlined above.
A finder’s fee consisting of US$80,000 cash payment and issuing of 2.5 million shares and 2 million Options is payable on execution of a binding agreement.
An additional finder’s fee of 4 million shares and 2 million Options may be payable on definition of a 700 million tonne JORC compliant resource and on decision to mine, an additional 4 million Shares and 2 million Options will be warranted.