Baru Resources lists on ASX today, dialled into coal exploration success in Queensland

Baru Resources (ASX: BAC) provides an enticing new entry vehicle for investors wanting exposure to the West Galilee Basin in Queensland.

Baru recently completed a successful IPO which offered 30 million shares at $0.20 to raise $6 million.

The company will hit the ASX boards today at 11:00am AEST, Thursday 22 September, and brings a very tight capital structure that ensures the company is leveraged to any exploration success.

Baru holds large scale coal exploration targets and acreage in the under explored but prospective North Western Galilee Basin in Queensland - with the company's short term aim to define a JORC Resource.

The company holds six Exploration Permits and one Exploration Permit for Coal Application known as the West Galilee Project, which covers an extensive 7140 square kilometres of the Eromanga Basin in northern Queensland.

The Exploration Permit contains 2,100 sub blocks or 5,880 square kilometres and is drill ready – with no native title or strategic cropping issues, and is positioned 200 kilometres from Hughenden and 375 kilometres from Mount Isa.

The potential of the Galilee Basin to host large coal deposits is evidenced by Linc Energy's (ASX: LNC) project area in a similar basin margin stratigraphic setting, 120 kilometres to the east, with Indicated and Inferred resources of thermal coal respectively of 161.4 million tonnes and 78.3 million tonnes.

Another major plus is the West Galilee project area is intersected handily by the Mount Isa - Townsville Rail line (Eastern Rail Corridor).

This provides for potential ports such as Townsville and Abbott Point, with Feasibility Studies already commencing for a Townsville port upgrade, with the Abbot Point Coal Terminal earmarked for expansion.


West Galilee - three basins

West Galilee encompasses three overlapping basins known as Galilee, Eromanga and Millungera, with Galilee and Eromanga known to be coal bearing - while containing economically exploitable seams of thermal coal.

The Millungera has recently been defined and interpreted as potentially hosting significant coal seams. The West Galilee project is initially targeting coal deposits located in the Eromanga Basin.

The company is seeking to establish a low ash, high energy quality, coking coal project as a priority as well as pursuing a large quantity thermal coal target, with the objective to prove up an initial open cut mineable resource of high quality coking coal.

Three sedimentary basins that include the Galilee with coal bearing formations from the Permian age that are sub-bituminous to bituminous; Eromanga is Cretaceous in age and carries both sub-bituminous coal and lignite; and the newly identified Millungera, which remains unexplored.

Other formations are known within the Eromanga Basin including Wallumbilla, Blantyre and Birkhead; and Bandana and Aramac in the Galilee, with numerous coal seams up to 3 metres in thickness recorded throughout the project area.


Exploration spend - two year view

With the IPO successfully complete, Baru has set a first year exploration budget of $940,000 to cover drilling, contractor expenses, mapping, surveying, down-hole geophysics and sundry expenses.

The second year of exploration will absorb up to $2.11 million that includes 15 Rotary Chip drilling programs and 10 Partially Cored drilling programs.


Analysis - tight capital structure

Although early stage in its evolution, Baru has a very tight capital structure that ensures it is leveraged to any exploration success. The company has also timed its run to the ASX well, maximising the current investor interest and success backing Queensland coal explorers and developers.

West Galilee is a green-field exploration play, with no prior exploration history for coal in the area other than the drilling of 31 holes on ATP289C, which identified the Blantyre Sandstones with cumulative coal intersections of 4 metres, to the north of the project area.

Water bores within a 100 kilometre radius of West Galilee have recorded from 0.5 – 17 metre seams of coal from depths of 21 – 1,295 metres. 

A possible line to assess the potential prospectivity of Baru’s tenements and hence calculate valuation is the most recent announcement by Guildford Coal (ASX: GUF) of an exploration target of 580 million tonnes to 5.72 billion tonnes for its Hughenden project.

On the news, the Guildford share price rose by around 28%. Guildford’s tenement is adjacent to Baru’s West Galilee project.

Guildford is a coal exploration company that has been listed on the ASX for less than 12 months and is valued at around $250 million, (the company also has significant other Queensland coal assets and Mongolian coal assets).

Originally published at: http://www.proactiveinvestors.com.au/companies/news/19891/baru-resources-lists-on-asx-today-dialled-into-coal-exploration-success-in-queensland-19891.html