The 43,830-hectare project lies 84km south of Tavan Tolgoi, one of the world’s largest untapped coking and thermal coal deposits.

The licence is considered prospective for extensions of the 6 billion tonne Tavan Tolgoi coal deposit and also contains a thrust fault that is a potential extension of a large coal-rich fault west of Ulaan Tolgoi.

The South Gobi province of Mongolia has become known as the epicentre of recent exploration and mining developments, particularly for coking coal and high energy thermal coal within southern Mongolia.

Newera executive chairman Martin Blakeman said the company had been looking for a second, highly prospective coal exploration project for some time.

“Ulaan Tolgoi is ideally located near the centre of the South Gobi province, being close to the Chinese border and surrounded by major operating coal mines, developing coal projects and new coal discoveries,” Blakeman said.

“China is one of the world’s major energy consumers and the world’s largest steel producer with around 680 million tonnes of steel production per year.

“We view the outlook for the Chinese coking coal and high energy thermal coal sectors as very robust for the near to medium future.”

There are advanced plans for the expansion of the Mongolian rail network to connect Tavan Tolgoi to the Chinese rail network, with the rail line likely to enhance the economics of any new coal discovery at Ulaan Tolgoi.

“The fact that the Ulaan Tolgoi licence area has had very little modern exploration completed over the potential late Permian coal bearing sequences, which we consider may be masked by extensive colluvium cover, gives Newera the opportunity to quite quickly run seismic or electromagnetic surveys over the basin sequences to determine if coal drilling targets exist under the cover,” the company said.

“We understand that the giant Tavan Tolgoi deposit was discovered in a greenfields area with no coal outcrop whilst drilling for water.

“The opportunity always exists for the discovery of another Tavan Tolgoi.”

Once Newera has completed due diligence and is satisfied with the results, the company is required to pay $US64,000 to the vendor.

Under the stage 1 earn-in, Newera can earn an initial 51% interest by spending $200,000 by June 30, 2014.

The company can then increase its interest by a further 19% by spending another $1.2 million or undertaking no less than 4000m of drilling within three years.

“We are very keen to get the joint venture bedded down and to quickly commence exploration within Ulaan Tolgoi,” it said.

Otherwise focused on Australian uranium exploration, Newera expanded its portfolio into the Asian country early last year.

At its flagship Shanagan project Newera has completed two initial drilling programs to test identified coal seams and search for other coal seams at depth.

Following positive results and discoveries of high-end black coal, Newera is planning a third drilling program of about 15 holes.