The exploration licence would cover about 1 million acres, estimated to contain in excess of 10 billion metric tons of economic brown coal resources.

The company has executed a letter of intent to acquire rights within the area of Exploration License 4416. The current holders of the exploration rights, CBM Resources and Victoria Coal Resources (together known as VCR), are subsidiaries of Geostar Corporation and hold about 10% of Gastar's common shares.

The letter calls on Gastar to pay VCR $30 million in cash in a series of payments before February 2007.

Gastar's percentage interest will increase with each payment, up to the 50% level.

“Under the proposed arrangement, VCR would initially act as project operator, providing Gastar with independent third-party feasibility studies for the development of demonstration and/or pilot projects to utilise various portions of the brown coal resources,” Gastar said.

“These project feasibility studies will examine the economic and commercial viability of certain technologies for the production and sale of upgraded low-moisture coal products, the manufacture of high grade steel using treated and reformed brown coals as feedstock in a low cost, single step process, and various other clean coal technologies.

“We believe this acquisition would position Gastar as a meaningful participant in the coal-to-liquids [CTL] sector, through control with VCR, of substantial resources in one of the largest and best understood brown coal deposits in the world,” Gastar president and chief executive J Russell Porter said.

“From a strategic perspective, the acquisition of these rights gives Gastar an asset position in the exploration licence that we believe could have tremendous upside potential, at a very attractive acquisition price. Further, it will complement our existing Australian holdings in Victoria [CBM and Mineral Sands exploration rights] and in New South Wales [CBM exploration rights].”