Palace Resources said it had been notified by the vendors that a 1000m drilling program had started on the property and the drilling results would be made available to the company as part of due diligence.

“The drilling program is designed to better define the immediately mineable area and to test the extension of the known coal seams on the property,” company secretary Roland Berzins said in a statement.

It is expected to take 40 days to complete.

PT Solusi Coalindo holds 100% interest in the 200 hectare project, which is part of a larger 4000 hectare coal contract of works.

Palace is looking to acquire a majority 80% interest in the project and, under the terms of the acquisition, form a new Singaporean company with PT Solusi Coalindo to carry out the joint venture.

All of the environmental and mining approvals at the project are in place and infrastructure is well developed.

Good quality haul roads exist in and around the concession area, with the intermediate stockpile 25km from the mine and 35km from jetty locations.

If the deal goes ahead, Palace will issue 200 million shares to the vendor and reimburse expenses of developing the project up to date, to a maximum of $US350,000.

Palace is also required to issue a total of 250 million performance shares on the meeting of certain milestones, including sale of first production and the definition of an Indicated JORC Resource of 3 million tonnes.

The company will cover all capital and operational commitments and expenses while the project is operated as a joint venture.

Palace is listed on the Australian Stock Exchange and has three other projects in development in the region.