Under the terms of the agreement the Botswana-focused Hodges will issue up to 210 million shares in a series of tranches as certain milestones are met.

The open cut mine has been mined for domestic consumption.

Historical reporting indicates the mine has been sporadically operational since 1986 and mines about 100,000 tonnes in less than six months of the year.

A resource report was completed under the Russian classification system using data from about 160 holes.

Estimates are in Russian resource categories A, B and C levels, supporting an exploration target of 120-160 million tonnes of coal.

The coal, on an air-dried basis, has a quality ranging from 5500 to 6900 kilocalories per kilogram with 6-18% ash and total moisture of 8-24%.

Hodges’ first priority is to undertake a technical review of the estimates to convert them to JORC standards during the due diligence period.

This process can be fast-tracked subject to accessibility of all necessary data, which will be followed by a full-expansion review to expedite near-term production and cashflow potential.

The second project has had coal exploration and surface exploitation work.

Coal has been mapped at surface and sporadically drilled but no resource has been calculated.

Under the terms of the heads of agreement Hodges will issue:

• 65 million shares on the successful completion of due diligence and shareholder approval. Those shares will be escrowed for 18 months
• 35 million shares upon delineation and the Australian Securities Exchange announcement from Hodges of a JORC-compliant reserve tonnage at the historical mine project of at least 50Mt of mineable coal
• 50 million shares upon the achievement of coal production and sales rates from the historical mine such that the sum of any four consecutive months of production is at least 1670,000t. It will be at an operating cost of less than $45 million per tonne, free-on-board at the Chinese border, if the required production rate is achieved in the first two years or less than $40/t if the rate is reached after the first two years
• 30 million shares upon delineation and ASX announcement of a JORC-compliant indicated resource at the exploration project of at least 100Mt of coal. That coal is to have a minimum 6000 calorific value and no more than 20% ash and 1% sulfur on an air-dried basis
• 30 million shares if a decision to mine is made in relation to the exploration deposit.

Hodges managing director Mark Major said the previously mined asset would play an important part of Hodges development.

“It is our belief we could see rapid development at this mine for minimal capital expenditure given the existing infrastructure of an open pit with coal already at surface, roads, power and labour all available,” he said.

“Our initial review suggests the mine can be scaled up in the short-term and provide substantial free cash flow.

“The location of the project also works in our favour. With neighbouring China being the major consumer of thermal coal we see our growth in line with this demand as well as the regional and domestic demands.”

Kyrgyzstan is making a push to become a major supplier to China.