WPG Resources reports coal from Penrhyn project ideal for export markets

WPG Resources (ASX: WPG) has reported that Evergreen Energy Inc (NYSE Arca: EEE) has completed its initial testwork on coal from the Penrhyn project, confirming the coal is well suited for export markets.

WPG recently announced on 22 August 2011 that it had agreed to sell its iron ore assets to OneSteel Limited (ASX: OST). WPG’s coal interests and its land in Port Pirie and its right to construct an export port there were not included as part of that sale.

The total coal resource estimate for the Penrhyn deposit, located  south west of Coober Pedy in South Australia, is 352.4 million tonnes.

The coal was sent to Evergreen’s test facility in Wyoming in May 2011. Evergreen reported that "the heating value of the coal after it had been upgraded exceeded 5,500 kcal/kg prior to rehydration required for product shipping and storage.

"We anticipate that the likely heating values for the final product may be lower than 5,500 kcal/kg, but will be ideal for export markets, and could utilize the infrastructure available in WPG’s Port Pirie terminal.”

Additional tests intend to confirm the heating value after the coal has returned to a stabilized moisture level and are expected to be completed prior to the end of September.

Penrhyn is owned by Southern Coal Holdings Pty Ltd (SCH), the joint venture vehicle with Evergreen that has the exclusive rights to use Evergreen’s coal upgrading technology in Australia for the first 15 mtpa of product coal from any project, not just from tenements that it currently holds.

The proposed sale of WPG's iron ore assets represents a return on WPG’s iron ore investment of $70 million of about 400% and equivalent to $1.40 per share in a market where cash is king. WPG will distribute the after-tax proceeds of the sale to shareholders upon requisite approvals.

If development of Penrhyn or SCH’s other coal deposits including Lochiel North prove to be technically feasible and economically viable then Port Pirie could be used for coal exports, subject to approval.

Originally published at: http://www.proactiveinvestors.com.au/companies/news/18958/wpg-resources-reports-coal-from-penrhyn-project-ideal-for-export-markets-18958.html