The company has had recent management changes, chief among them being the appointment of managing director Michael Gray, who took the helm this March.

Gray’s previous stint as chief executive of Middlemount Coal, a joint venture between Peabody Energy and Gloucester Coal, is expected to prove valuable experience for his new job.

In that role, he led the development of the Middlemount project from exploration project to operating mine. Middlemount became the first greenfield coal project developed in Queensland since 2007.

Gray envisions a similar path for Bandanna.

Bandanna holds 16 exploration permits for coal in the Bowen and Galilee basins in Queensland.

The company started out as Enterprise Energy, and after acquiring the issued share capital of Bandanna Energy in 2008, became an ASX300 company.

With a 1.6 billion tonne resource, the company has one of Queensland’s largest JORC-compliant resources for thermal coal resources and is now keen to become the state’s next coal producer.

“The priority is to transition over the next three years into a coal producer,” Gray told RESOURCESTOCKS.

Efforts to develop Bandanna’s projects in the Bowen Basin got a boost with Bandanna acquiring a 4 million tonne per annum port allocation at the new Wiggins Island coal export terminal currently being constructed in Gladstone.

Under that project, a new terminal with a capacity of 27Mtpa will be constructed, and Bandanna has a 14% shareholding in that venture.

Gray said that now with a port contract already in place at Wiggins Island, the strategy was to get Springsure Creek – Bandanna’s flagship project – into production by the second half of 2014 to coincide with the completion of construction of the terminal.

With total JORC resources of 490.5Mt, which comprises an inferred resource of 262.5Mt and an indicated resource of 228Mt, Springsure Creek is Bandanna’s largest coal project.

An independent estimate by mining consultant Minecraft pegs the marketable reserves at 153Mt.

“With an almost 500Mt resource with an underground operation, we are targeting 11Mtpa of coal in two stages with two longwalls,” Gray said.

“It’s a good quality resource, with low raw ash so that it won’t require washing and can be exported as a raw coal.”

The company achieved yet another milestone in developing Springsure, with a significant reserve upgrade late last year. Gray said the plan now was to complete a definitive feasibility study by the end of September and progress the environmental impact statement for approval by the end of 2012.

In addition, Bandanna had also conducted initial talks with potential offtakers, Gray said, pointing out that demand from the traditional markets of Japan, South Korea and Taiwan remained robust while there was significant new demand emerging from countries like China and India.

But with development of Springsure Creek expected to cost around $A700 million, Bandanna is in search of an equity partner.

A UBS-led process was abandoned last year after the global economic downturn, and instead, since the start of this year, Bandanna has been approached by a number of parties interested in a joint venture at Springsure Creek.

“We are in discussions for an equity sell down in Springsure Creek but we’ll maintain an equity control of at least 50 per cent,” Gray said.

He added that while part of the money to develop the project would come from project finance, an equity divestment would prevent the need to tap the capital or debt markets.

“We believe that our contributions to the capital costs of developing the project will be met through project finance and equity sale,” he said.

With a financial close on Wiggins Island tieing up port and rail access to the Bowen Basin assets, interest is likely to be high.

Gray said a deal could be done by end of this year.

Bandanna’s other Bowen Basin assets include Dingo West, Arcadia and Arcturus, where it has 100% total interest.

Dingo West is a 1Mtpa open cut pulverised coal injection coal project, which is also slated for DFS.

However, the company’s Galilee Basin asset is perhaps longer term, as access to infrastructure is a major issue for developing projects in that basin.

It has a 50:50 JV with AMCI at its South Galilee project.

After having lost its bid for a port allocation at Abbot Point, the South Galilee JV is now in discussions with other preferred parties for user access.

But with the timing of progress of rail corridors for the Galilee Basin likely to dictate the commencement of development, Bandanna is primarily focused on its Bowen Basin projects.

Gray admitted there remained some key challenges to developing projects, including complexity in the regulatory approval process.

“One of the key challenges is the regulatory process,” Gray said.

“We have perhaps the most stringent environmental approval process in the world and Bandanna is committed to ensuring that it can demonstrate its ability to comply with these regulations.”

And there are other challenges, such as getting the infrastructure built and getting the necessary skilled workforce, all of which can lead to high capital costs.

“There is definitely a challenge in attracting skilled people,” Gray said.

But despite these challenges, Bandanna’s future seems secure as both its reserves estimate and the port access to ship it make the company well positioned to be the next producer in the state.

*A version of this report, first published in the June/July 2012 edition of RESOURCESTOCKS magazine, was commissioned by Bandanna Energy