Northern Star Resources has struck coal while looking for gold in Western Australia’s Pilbara region.
The gold miner has made a significant coal discovery just 100 kilometres from its Paulsens gold mine.
The discovery was made during reconnaissance drilling targeting palaeo-channels which the company thought would contain gold.
Northern Star managing director Bill Beament said the discovery is a “potentially valuable find with the scope to emerge as a large-scale thermal coal deposit”.
Initial exploration suggests the coal target could be as large as 340 to 615 million tonnes.
Drilling indicates thermal coal intersections varying in thickness from 12 metres to 65 metres recorded in eight aircore drill holes along a seven kilometre strike, four of which ended in coal.
The discovery lies beneath soft overburden ranging from 32 metres to 73 metres in thickness.
Engaging independent coal consultant Xenith, preliminary analysis suggests the resource is a low-rank thermal coal, similar to that mined in Indonesia and currently exported to India and China.
The company said it will remain focussed on gold but plans to develop its coal assets via a joint venture, in-specie distribution of shares in a separate company or possibly put the find up for sale.
“Northern Star has begun studying ways to optimise this discovery without changing its focus from gold,” the company said.
“Initial analysis shows the coal would be suitable for fuelling a major base-load power station and may also be amenable for a coal-to-liquids project which could supply diesel to the Pilbara.”
In the meantime Northern Star has approved a budget of $2 million to carry out further drilling and establish a maiden JORC resource.
“Whilst being disciplined in our spending, we propose to establish a JORC resource estimate and undertake the preliminary preparations for a corporate solution to potentially monetise our discovery,” Beament said.
Follow-up drilling has already commenced with results due in the March quarter of 2014.
The bulk of the exploration work completed to date has been on tenements that are 100 per cent owned by Northern Star.
But the company said there is a potential for the seam to run onto tenements held by Fortescue Metals Group.
“These tenements are subject to a joint venture agreement under which Northern Star can earn up to 60 per cent of the non-iron ore rights,” the company said.