Liberty, which has as coking coal discovery in Queensland’s Bowen Basin, announced yesterday it reached agreement with Auto Investment International to cancel the investor’s shares in Liberty by way of a selective reduction of capital in exchange for the transfer of all the issued shares in Liberty subsidiary Walloon Energy.

Liberty revealed that Auto was the shareholder which convened the Corporations Act 249F meeting in February to replace the then board with its representatives.

“While that attempt by Auto did not succeed, Liberty is pleased to have reached an agreement with Auto that, if shareholders approve, will be to the benefit of all stakeholders,” Liberty managing director Andrew Haythorpe said on behalf of the board.

At the date of the transfer, Walloon will hold Queensland tenements EPC (exploration permit for coal) 1373, 1818, 1698, 1736, 1737, 1739 and 1386, plus MDL (mineral development licence) 483.

If all approvals are obtained, the number of shares liable to be cancelled is anticipated to be in the region of 78 to 80 million, representing 23.9 to 24.5% of Liberty’s current issued capital.

“This will provide a bonus to remaining shareholders in terms of their respective percentage holdings in the company, and will allow the company to focus on moving forward,” Haythorpe said.

The notice of meeting and proxy documents to approve these matters is expected no earlier than October 21.

As part of the deal, Liberty also proposed a JV with Walloon in relation to coal tenement EPC 1949, whereby Walloon would be transferred 60% up front in exchange for spending $1.5 million over the first three years for exploration and related studies including a JORC resource.

Walloon would also be required to keep EPC1949 “in good standing in relation to all aspects of the obligations of a tenement holder under [but not limited to] the Queensland Mineral Resources Act 1989”, Haythorpe said.

Walloon must also complete a feasibility study on EPC 1949 having spent at least $5 million, within five years of the 1949 JV starting.

“The board of Liberty see this as a timely opportunity to progress exploration on EPC1949, and while an initial 60% of the tenement is being transferred, it allows the company to retain a significant interest and see development of 1949 continue, when the market for available capital is otherwise limited for junior resources companies,” Haythorpe said.

Liberty also reported yesterday a “very attractive” revised open cut exploration target in its Bowen Basin coking coal discovery in Queensland. This target is now between 80 million to 160 million tonnes of product coal (best estimate 120Mt).

“This exploration target is considered very attractive due to the coke potential demonstrated from analysis of the product coal, the attractive strip ratios and the size and location of the deposit adjacent to established mining infrastructure.

“Following detailed correlations and comparisons with geology from adjacent operations this recent work has confirmed that Liberty’s 2013 drilling program intersected seams equivalent to the Rangal coal measures which are currently mined at several locations adjacent to EPC1949,” Haythorpe said.