Emerging explorer Cuesta Coal will pay $18.2 million to acquire Hannigan & Associates’ Orion coal project in a strategic move that will see the company double its coal bearing strike length in Queensland’s Bowen Basin area.

Cuesta owns the West Bowen project which is adjacent to the Orion site, and the two projects will be consolidated to create two open pit opportunities over a 20km coal strike.

Orion currently has an indicated coal resource of 29 million tonnes, an inferred coal resource of 54 million tonnes and an additional exploration target of between 80-90 million tonnes.

Cuesta will target an annual run-of-mine production rate of 4 million tonnes over a minimum 20-year mine life, providing the company with a significant development project 14km from the existing infrastructure at the Blair Athol mine.

Cuesta managing director Matthew Crawford says, “This is a company transforming transaction as it brings to Cuesta a large open cut project close to existing rail infrastructure. Importantly, it transforms Cuesta from a coal explorer to a project developer with a potentially significantly reduced timeframe and CAPEX to first coal production.

“By combining our West Bowen project with the Orion coal project, we are creating a large coal project which has the potential to contain more than 200 million tonnes of coal,” he says.

A $5 million payment has already been paid, with the balance of $13.2 million payable before the end of February 2013. Cuesta says it is continuing positive discussions with its cornerstone investor Beijing Guoli regarding funding support for the transaction.

Beijing Guoli Board representative Zheng Huaixi says, “Beijing Guoli supports this acquisition and we are delighted with the progress Cuesta has made since its ASX listing earlier in the year. We will continue to support Cuesta's growth as the company transforms from an explorer to producer.”

Cuesta aims to complete its scoping study of the Orion site, located about 260km west of Mackay, by April next year. It will begin drilling soon afterwards and has scheduled completion of a feasibility study by early 2014.

The southern section of the project has not been fully explored but significant coal intersections have been encountered. Close-spaced drilling by Cuesta in the northern section gives confidence that exploration in this southern section may result in significant additional resources.

www.cuestacoal.com.au

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