The agreements between RGGS and Kodiak include an option agreement to lease the underground mining rights to the Upper Thompson coal seam on about 1115 hectares and an agreement to acquire a coal lease on the Gholson and Clarke seams on about 170ha.

The acquisition agreement for the Upper Thompson seam includes an upfront option fee of $US70,000 ($A74,000); a one-year option term from the date of signing; another $305,000 to exercise the option; a term lease of 18 years or until any discovered coal reserves are exhausted, subject to certain minimum production milestones; and an 8% royalty on net coal sales at mine gate with a minimum monthly royalty of $8000 starting six months from the date of exercising the option.

Key terms for the acquisition of an area known as Project X include an upfront leasing fee of $25,000; an 18-year lease term or until any discovered coal resources are exhausted, subject to certain minimum production milestones; and an 8% royalty on net coal sales at mine gate with a minimum $3000 monthly royalty starting 12 months from the date of signing.

Attila executive director Evan Cranston said the acquisition of Project X – comprising the Gholson and Clarke coal seams – and the option over the Upper Thompson lease was a significant milestone for Attila as it moved towards production.

He said the acquisitions provided critical access to coal seams in adjacent properties, previously considered sterilised.

“More importantly, the company now has access to all the major hard coking coal seams in the Cahaba basin,” Cranston said.

“Attila is progressing discussions with other leaseholders in the area with a view to further expanding its footprint and increasing its share of the 500 million tonnes of coal estimated to remain in the basin.”

Stagg Resource Consultants, Attila’s independent geological consultant, has provided an initial exploration target of about 11-13Mt of hard coking coal from an area of about 1115ha under the Upper Thompson lease.

The lease contains the Upper Thomson No1 mine that was mined by the principals of Attila’s joint venture partner TBL Metallurgical Resources from 2008 to 2010.

In 2010 management redirected resources to another operation within the basin.

Attila has already drilled eight diamond coreholes within the Upper Thomson lease as part of its previously completed diamond drill program.

It was the largest single drill program conducted by a coal company in the Cahaba Coal Basin.

Previous drilling shows the Upper Thompson seam to be between 0.8m and 1m thick with the thicker portions being targeted for future mining.

Historical and present drilling indicates coal from the Upper Thompson seam to be a high quality coking coal with washed coal having low ash and sulphur content and a high fixed carbon conten, making it suitable for export metallurgical markets or in blending for domestic markets.

Besides the option to lease the Upper Thompson seam, Attila has entered into a lease agreement with RGGS to mine the Gholson and Clarke coal seams at Project X.

The project is also located on Attila’s Gurnee property.

Project X is located within 2.5km of Attila’s existing coal preparation plant and associated infrastructure.

It has an exploration target of 2-3Mt, as determined by Stagg, based on Attila’s existing phase 1 drilling program that drilled through the Gholson and Clarke seams.

Coal qualities are similar to that of Attila’s existing high quality hard coking coal resources and reserves found in Attila’s Coke and Atkins coal seams.

The coal seams range between 0.8m and 1.6m in thickness.

Acquiring Project X gives Attila key access to what was previously thought to be sterilised coal resources on adjacent properties.

Project X contains the historic Boothton coal mine that was mined in the 1920s.

The historical mains and associated barrier pillars contain the main access into the basin, which contains a vast amount of coal resources as derived from historical coal bed methane wells.

The proximity of Project X to Attila’s existing infrastructure gives the company the opportunity to start production from the Gholson and Clarke seams, giving it a third potential coal mine.

Attila plans to fund the acquisition of the option for the Upper Thompson lease and the upfront leasing fee for Project X from its existing cash reserves.