Whitehaven’s expert’s total estimate of 369 million tonnes for Ferndale comes in at half of Coalworks’ expert’s 743Mt while Whitehaven’s resource for the potential Ferndale underground mine at 82Mt is less than a third of Coalworks’300Mt.

This is a significant disparity at a time when Whitehaven is making a hostile bid for the company, valuing it at $172 million.

As mining exploration or development companies have no production figures to go by, the resource estimate is essential to providing some fix on the inherent values of the assets.

One rule of the thumb is the enterprise value per tonne of JORC compliant resource. So if a company has a market capitalisation of $100 million and a resource estimate of 100 million tonnes that is a straight one to one ratio.

But the parameters of a JORC resource estimate has some flexibility. In the Ferndale case Whitehaven’s expert used a 1.8m seam thickness cut off point for the underground mine while Coalworks has used a 1.0m cut off. Coalworks’ estimate also includes a seam that lies beyond 400m in depth whereas Whitehaven’s doesn’t.

In its merger documents with Aston Resources and Boardwalk Resources, Whitehaven said exploration at Ferndale is at an advanced stage in the northern area of the tenement, where shallow open cut coal targets have been identified.

It said that it had underground thermal and semi-soft coking coal potential and that Stage 3 of the drilling program was planned for completion in 2012 with the objective to define resources by May 2012.

While it has delivered on the defined resource, shareholders have been left confused as to how much the assets are really worth, given the two conflicting JORC-compliant resource estimates.