Pan Asia Corporation eyes early cash flows from open pit coal production in Indonesia

Indonesian focused Pan Asia Corporation (ASX: PZC) is unlocking the potential of the 75% owned Trans Coal Minergy coal project (TCM), with the latest infill drilling confirming the open pit potential.

Importantly - the 14 holes within the existing JORC Resource indicate around 3 million tonnes are potentially open pittable within the TCM side of the boundary with the PT Arutmin ATA mine, based on a strip ratio of =20:1.

In total the project has a 53.2 million tonne JORC Indicated and Inferred Resource, where there are four main coal seams that dip into TCM, with a high calorific value thermal coal of 6,500 to 6,800+ kcal / kg (adb).

Alan Hopkins, chief executive officer of Pan Asia, commented favourably on the results - and said, “This is extremely encouraging.

"A preliminary open pit mine, combined with the planned extensive underground mining operations, would bring project cash flows forward while also generating a preferred entry for underground mining.”

In other Pan Asia news, a topographic survey over the potential open pit area is expected to be available within four weeks, after which detailed pit optimisations and sensitivity analysis will be commissioned followed by preliminary pit designs.

The company has outlined that further drilling may be required to better define the extent of the open pit area, with the final design expected will be completed by the end of 2011 - which will be included in the Feasibility Study currently being undertaken by Kopex.

The Trans Coal Minergy project metrics

Pan Asia has an exploration target of 53Mt to plus 70Mt, with a target scale of operation 1.5Mt to 2Mt annually - for a mine life of 15 to 20 years.

Based on a coal value per tonne (FOB MV) of US$80 plus, CAPEX + OPEX pre production of around US$150 million.

Resource estimation parameters

- Minimal thickness of 0.2 metre coal seam has been taken to calculation of total coal thickness.
- Maximal value of strip ratio 20:1 was assumed for resources area calculation.
- Average thickness of coal seams used for volume of resources estimation was calculated on boreholes located inside resources area with strip ratio 20:1.
- Last/deepest coal seam taken under consideration is seam SL-1. Seam SL-2 was disregarded due to discontinuous occurrence.
- Strip ratio and overburden rocks thickness were calculated on boreholes only. It is point/linear strip ratio.
- Specific density of coal was assumed as weighted average value for whole TCM deposit.
- For purposes of this study quality model of the deposit was not analysed.

Stonebridge places $0.44 price target on Pan Asia

Adding some spice to the potential of Pan Asia, earlier in the month StoneBridge Group published a research report on emerging thermal coal junior with a $0.44 price target - which is more than four times the last traded price.

The buy recommendation was based on using a discounted cash flow at TCM based on a 2.8mtpa ROM for 15 years with a 60% risk weight.

Originally published at: http://www.proactiveinvestors.com.au/companies/news/18876/pan-asia-corporation-eyes-early-cash-flows-from-open-pit-coal-production-in-indonesia-18876.html