PERTH (miningweekly.com) - ASX-listed coal developer Hodges Resources has entered into a binding heads of agreement to acquire the Knox coal project, in the US.

The project consists of four permitted mining leases containing specialty metallurgical coal suitable for surface mining, and one currently permitted rail loadout.

The project has an exploration target of between two- and three-million tons over some 3 000 acres, with a further 10- to 13-million tons targeted over a further 11 700 acres of similar coal leases under option.

“The company is delighted to have the opportunity to acquire an option over such a high-valued commodity in a developed economy, with established infrastructure,” said Hodges MD Mark Major.

Under the terms of the transaction, Hodges would pay $2-million and a 4% royalty rate to secure 100% of the permitted mining leases making up the Knox project, as well as the permitted loadout facility, along with options over additional leases and facilities.

At a later date, Hodges would pay an additional $2-million on the completion of a key milestone.

Major said that the Knox project represented a strategic move by Hodges, intended to provide a discreet, near-term metallurgical coal production opportunity to balance the company’s overall coal portfolio, which currently includes a highly prospective, but longer-term thermal coal project in Botswana.

“This is a low-cost entry into the US metallurgical coal markets and exposure to a potentially near-term production opportunity is a material development for the company,” he added.

“The expected timeline to production is estimated to be three to six months, which will provide cash flow and new growth opportunities for Hodges as we continue to develop our larger project in Botswana.”

The company would undertake a due diligence study on the Knox project, including a technical study on the optimisation of the mine development.

Hodges was currently proving up its multibillion-ton thermal coal asset in Botswana, where a mine scoping and power integration study was recently completed for the Morupule South project.