The company entered into a binding heads of agreement to acquire 100% of four permitted mining leases and a permitted load-out facility, collectively known as the “Knox project”

“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,” Hodges managing director Mark Major said.

Major was not allowed to specify who the vendor was but did say it was an individual.

The Knox project provides a near-term metallurgical coal production opportunity for the company to balance its overall coal portfolio which currently includes a highly prospective but longer-term thermal coal project in Botswana, as well as projects in Sweden, Ghana and Australia.

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

“The expected timeline to production is estimated to be 3-6 months, which will provide cash flow and new growth opportunities for Hodges as we continue to develop our larger project in Botswana.”

The leases have an exploration target of an estimated 2-3 million tonnes on around 3000 acres.

An additional exploration target of around 10-13Mt over a further 11,700 acres of similar coal leases are under option.

The project’s coal seams are a specialty low-ash metallurgical coal, expected to sell for approximately $225 per tonne in the domestic market.

The company says the coal appears to be an extremely high quality hard coal with a low ash and high-carbon content.

The coal from the Blue Gem seam is of a type used by silica metals groups.

Major said one of the company’s possible export options – should it choose to go that way – would be to ship out of Norfolk.

“But we’re only talking about 20,000-40,000 tonnes per month,” Major said.

“We’re not really talking large-scale mining.”

Another option is to sell to silica metal producers in the US.

Many of these, Major said, would buy the coal once it cleared the wash plant.

“These groups only take small quantities,” Major said.

Hodges will secure the project for a total cost of $2 million and a 4% royalty.

At a later date the company will pay an additional $2 million pending the completion of milestones by the vendor.

Hodges is currently conducting a 90-day due diligence study after which a definitive agreement will be signed.