Rey Resources adds $4 million to coffers, in "advanced discussions with several parties"

Rey Resources (ASX: REY) has raised about $4 million that will be used in part to progress the company’s Duchess Paradise Thermal Coal Project in Western Australia’s Canning Basin.

The money was raised through the placement of 28.6 million shares to institutional and sophisticated clients of Euroz Securities, at a price of $0.14 per share.

Managing director Kevin Wilson said the company was pleased with the strong support from investors.

“The funds raised, together with our existing cash on hand will ensure we can progress the permitting and approvals required for the Duchess Paradise Coal Project, while maintaining a sufficient level of working capital.”

Money raised will also be used to continue exploration activities and provide working capital. The new shares will be allotted and listed on December 19.

Rey has had significant success at Duchess Paradise in recent times, a fact which has not gone unnoticed.

Significantly, the company has been approached by a number of parties interested in becoming involved with the project.

“We continue to advance discussions with several parties who have expressed interest in becoming partners in the Duchess Paradise Coal Project,” Wilson said.

On June 27 Rey completed the Definitive Feasibility Study on Duchess Paradise, confirming it as economically robust and technically viable.

The project has an established JORC Reserve of 26.3 million tonnes of thermal coal, based on detailed mining plans.

In September, drilling confirmed the strike extent of a coal outcrop for 2 kilometres to the north, beyond the existing coal reserves, along with extensions to the P1 Seam resource for 2.5 kilometres to the east.

“These results suggest further support for our positive Feasibility Study by indicating that the proposed slot mining mine life may be extended as well as identifying further coal at depth,” Wilson said.

“A resource re-calculation will be made in 2012 once all coal quality results have been received.”
Analysis
It is little surprise that Rey has received approaches from parties wanting to partner with Rey on the Duchess Paradise Project, given the results of the DFS and potential to unlock further value from Rey's Canning Basin project as well as demand from Asian markets, particularly from India and China.  The Duchess project is well placed in terms of freight advantages to those markets.
In addition, India is facing a widening gap between coal demand and supply.

This year India will produce 554 million tonnes of coal but demand is likely to hit 696 million tonnes of coal. By 2016, it is estimated that India will require over 1 billion tones of coal - a shortfall of 300 million tonnes it cannot produce.

Rey Resources with its potentially large Canning Basin coal production could be a part of the long term solution for India (and China) with its Canning Basin coal production assets.

The Canning Basin is a fast emerging coal region.  The region's importance is likely to become even more significant, as is an advanced project such as Duchess Paradise.

Originally published at: http://www.proactiveinvestors.com.au/companies/news/23288/rey-resources-adds-4-million-to-coffers-in-advanced-discussions-with-several-parties-23288.html