Under the binding acquisition agreement, Guildford has the option to increase its stake in Terra to 70% within six months of the start of drilling, although this is also subject to set exploration milestones and resource definition outcomes.

The deal to acquire 20% of Terra was struck for an up-front $6 million cash payment along with $1 million worth of Guildford scrip. If a call option is exercised, Guildford could buy another 50% stake for $10 million.

Guildford has lined up three rigs to start drilling Mongolian targets in April.

“The Mongolian projects have potential large-scale thermal and coking coal prospects and represent an opportunity for Guildford to become a coal producer within 12 months as the South Gobi project is located close to the Chinese border station of Ceke, where coal from Mongolia is already trucked into China,” Guildford deputy chairman Craig Ransley said.

“While the ongoing wet weather has impacted our progress on exploration on our Queensland projects, we still remain focused and are confident about delivering on our goals for our priority Queensland projects of Hughenden, Kolan (formerly Maryborough) and Sierra.”

Two rigs are drilling in the Hughenden project in the northern Galilee Basin while Guildford plans to restart drilling its Kolan project next month.

Terra owns four exploration licences and is negotiating for a fifth for its South Gobi project, while it holds two exploration licences in its Middle Gobi project.

The Middle Gobi project is targeting shallow thermal coal while the South Gobi region also hosts coking coal.

Guildford shares are up 12.6% to 85c this morning.