Detailed exploration work was carried out on the project in the 1970s and more recently a substantial area of hard coal was defined together with a significant area of additional potential, the company said.

UGL said historical data suggested Ulaan Ovoo was a potentially large coal deposit, with historical estimates of 78 million tonnes inferred coal for the north part of the project area. The south part of the project area, which remains incompletely explored, is speculated to have an exploration target of comparable potential size.

The project area is underlain by two main coal seams - with total net coal thickness up to 70m - and five minor layers, all of which are gently folded across the axis of a large syncline.

Historical coal quality analyses suggest that Ulaan Ovoo consists predominantly of low-sulphur, high-volatile bituminous-C coal.

Once the deal is wrapped up UGL said it would review all available data to produce an updated resource calculation. This will be followed by an aggressive exploration program which will include infill and exploratory drilling north of the fault aimed at expanding the resource.

UGL will also conduct marketing discussions with potential coal buyers in Russia, China and beyond while simultaneously preparing an extensive marketing study.

UGL has 18 uranium properties and 9 gold and copper exploration projects located throughout Mongolia. UGL has a strategic alliance with Mega Uranium to jointly develop its uranium assets, and with Mine Info, a leading Mongolian exploration service company. UGL has a full time office in Mongolia's capital, Ulaanbaatar.