A cooperation agreement to develop coking coal projects with a Mozambique government-owned company surprised few Cokal watchers mid-year.

Cokal had been formed just one year earlier, on the promise shown by some well-located coking coal tenements in Central Kalimantan, Indonesia.

A $20 million capital raising and backdoor Australian Securities Exchange listing followed in time for pre-Christmas trade with support readily garnered on the reputations of the new company’s board and senior management within the international coal sector.

Within months Cokal determined Central Kalimantan coal of sufficient quality for a potential initial start-up operation based on a direct shipped export product.

While the resource is yet to be quantified, Cokal would like to target a direct shipping operation of upto 2 million tonnes per annum.

With steelmakers seeking newsources of quality supply, and Indonesia considered to have outstrippedAustralia as the world’s largest coal exporter this year, Cokal’s early success has attracted a strength of interest not normally seen in early-stage ventures.

Mid-year was a busy period for Cokal negotiators, not only securing the Mozambique partnership, but increasing by 10%, to 60%, ownership of two of four key Central Kalimantan projects.

The projects are located in the North Barito Basin, where BHP Billiton holds a dominant land position comprising no fewer thanseven 75% joint venture developments.These include the Juloi venture immediately north of Cokal’s 19,920 hectare Bumi Barito Mineral (BBM) joint venture, and the Maruwai coal project to the east of Cokal’s Borneo Bara Prima (BBP) partnership.

Cokal’s BBM coal is particularly low in ash, low in sulfur, phosphorous and high in energy. Samples have demonstrated these qualities from all seams tested to date, some recording crucible swelling number levels as high as nine, on a zero-to-nine scale.

“We chose BBM for our initial shallow drilling because it was right on the Barito river and had the most outcrops and very bright coal,” Cokal executive chairman Peter Lynch said.

“The type of coal we have herecan be used to relieve some of the negative features starting to emerge in most of the coking coal now available in the market. We call our coal ‘confessional’ because it forgives the sins of the other coals.”

Lynch nominated the very low ash content as the most exciting thing about BBM.

“This project is a fantastic opportunity that doesn’t often present itself,” he said.

“We have a number of coal seams like this, where the coal won’t need washing.

“This means a very low-capital start and quick cash flow via direct shipping. We can just direct ship for 18 months and reinvest the revenue into a washing plant and building a larger project.”

Further, BBM’s riverside location does away with any need for new port or rail infrastructure.

“Central Kalimantan has been overlooked by many, but the infrastructure is simple, it’s on the doorstep of major markets and has fantastic coal,” Lynch said.

Cokal has four drill rigs in Central Kalimantan, ahead of an initial resource estimate expected towards the end of September.

Concept studies are anticipated before the end of the year.

BBP project drilling is also due to commence during the year.

The two additional Central Kalimantan projects, 75% held by Cokal, also host bright coal outcrops.

In Mozambique Cokal secured its agreement with Empresa Moçambicana de Exploração Mineira (EMEM), partly on the recognition director Pat Hanna gained for putting Mozambique on the coking coal map.

As Riversdale Mining’s exploration manager, Hanna was instrumental in amassing 13 billion tonnes of Mozambique coking coal resources in three years.

Under the new agreement, Cokal will hold 80% of a dedicated coking coal exploration joint venture company to be established with EMEM.

Central Kalimantan and Mozambique are not the only strings to Cokal’s bow, however.

A 50:50 joint venture established with Tanzoz Resources covers coal exploration in Tanzania.

As with the Mozambique and Kalimantan interests, the Tanzanian venture grew from relationships long-established by Cokal board members.

Located in the Karoo belt in southwest Tanzania, Cokal’s 50% held Manda project features multiple outcrops of highly weathered coal.

Cokal has been drilling Manda since mid-year and expects initial results by the end of the September quarter.

While Tanzania is not known for coking coal, Cokal is keen to test the assumption that Mozambique-style mineralisation trends through to Tanzania.

“The entry costs are so cheap, it’s definitely worth looking for coking coal here,” Lynch said.

A joint venture company 60% held by Cokal has been established as a holding company for additional Tanzanian prospects, for which Cokal has earmarked an initial $1 million spend.

“We’ve just started our assessment in Tanzania, but if we like projects, then we will commit funds,” Lynch confirmed.

Lynch says Cokal is focused solely on supplying growing markets for quality coking coal.

Any new acquisitions will be close to existing Central Kalimantan and East Africa ventures and chosen solely for their coking coal potential, he maintains.

“We believe coal has an important global role to play for decades to come and have faith in our ability to assess opportunities in areas of high potential value generation,” Lynch explained.

Lynch’s statement is no throw-away line.

Cokal executive director and geologist Pat Hanna’s professional roles over 30 years don’t just include his frontier coal exploration in Mozambique. Author of 19 technical publications and consultant to 40 coal projects, including several in Indonesia, Hanna’s knowledge and expertise in coal is highly regarded throughout the world.

Lynch, too, is high-profile in the sector, his CV includes the role of chief executive officer of Waratah Coal as it pioneered the Galilee Basin through to its acquisition by Clive Palmer’s Mineralogy, and managing director of Macarthur Coal’s APC as it expanded production to an annual 6 million tonnes.

Add to this mix Cokal managing director Jim Middleton and the company’s leadership expertise in coal is undeniable.

Middleton, a mining engineer by training, brings three decades of coal mining experience gained with the likes of BHP, Xstrata, Glencore, Exxon Coal and Coal & Allied Industries.

“I was at university with Jim and followed his career,” Lynch said.

“He was one of a team of five who pulled together the tenements that comprised the Xstrata float and was also vice-president of BHP Illawarra.”

This amalgamation of personnel appears to have been the key to the quick $20 million of support garnered in 2010 and a subsequent $12 million earlier this year.

“I was known around the markets, Jim has been known as an implementer and Pat a geological brain, so people viewed Cokal as a good opportunity,” Lynch offered.

“We traded strongly on the back of our expertise, according to what investors have told us, and then they were rewarded with our first drill results.

We’re particularly keen not to dilute our investors’ holdings and still have $20 million in hand, of which we’ll spend $8 million on exploration through to March 2012.”

By mid-next year Cokal is expecting to be in a position to make an investment decision on a potential BBM start-up by late 2012, just two years after listing.

Add to this the Mozambique and Tanzania potential, of which much more will be known by then, and Cokal investors seem likely to have little reason to fret.

*A version of this report, first published in the September 2011 edition of RESOURCESTOCKS magazine, was commissioned by Cokal