Red Hill's coal resources jump to one billion tonnes
2007-10-25 12:26 ET - News Release
Mr. Paul McKenzie reports
NEW 678.4 MILLION TONNE COAL DISCOVERY INCREASES RED HILL ENERGY'S MONGOLIAN COAL INVENTORY TO MORE THAN ONE BILLION TONNES
Red Hill Energy Inc. has made a major new coal discovery in southwest central Mongolia contiguous to CVRD's lead Mongolian coal project. Drilling on Red Hill's 100-per-cent-owned Chandgana Khavtgai coal property has defined a 678.4-million-tonne coal resource, with 188.7 million tonnes measured and 489.7 million tonnes indicated. Additionally, another 439.6 million tonnes of inferred coal resource has been outlined. Red Hill's total coal resources from two separate Mongolian coal districts now exceeds one billion tonnes. This includes 504.5 million tonnes classified as measured resources and 524 million tonnes classified as indicated, with an additional 475.5 million tonnes classified as inferred. This is a 193-per-cent increase in tonnage from Sept. 10, 2007, and is attributable to the very large Chandgana Khavtgai discovery.
Chandgana Khavtgai is located in southeast central Mongolia and is a sister property to Chandgana Tal, Red Hill's 100-per-cent-owned property nine kilometres to the northeast. Both Chandgana projects are in the historic Nyalga coal basin and are contiguous to a large coal project under way by a subsidiary of Brazil's Companhia Vale do Rio Doce (CVRD), also in the Nyalga coal basin. Combined, Red Hill's Nyalga coal basin projects account for 819.7 million tonnes coal (330.0 measured, 489.7 indicated) and an additional 439.6 million tonnes inferred.
Red Hill's Ulaan Ovoo coal project, in northern Mongolia, has a National Instrument 43-101-compliant resource of 208.8 million tonnes coal (174.5 measured and 34.3 indicated), and an additional 35.9 million tonnes inferred.
An independent National Instrument 43-101 technical report is being prepared on the Chandgana Khavtgai resource and will be filed within 45 days of this release as required by the Toronto Stock Exchange. The report will subsequently be posted on SEDAR together with other reports regarding Red Hill's Mongolian coal projects including National Instrument 43-101 resource reports on the Chandgana Tal and Ulaan Ovoo properties and a National Instrument 43-101 scoping study on the Ulaan Ovoo coal project. The latter study outlines potential for profitably mining six million tonnes per year over 30 to 40 years at Ulaan Ovoo.
A seven-hole drill program (1,237 metres) on Chandgana Khavtgai was conducted in August through September this year. The drilling recovered 160 total metres of coal core from five holes. Nearly all of the coal is contained within a single 25- to 60-metre-thick coal seam from surface covering an area of approximately 1,800 hectares. The seam doubles in thickness with depth, maintaining an average stripping ratio of approximately 2.1:1, remarkably low for a project of Chandgana Khavtgai's magnitude. The stripping ratio at Red Hill's nearby Chandgan Tal project is even better, averaging 0.53:1. At Red Hill's Ulaan Ovoo property in northern Mongolia, the stripping ratio is less than 2.0:1 for the first 140 million tonnes.
The Chandgana Khavtgai resource is based on five partially cored and rotary drilled holes. The drill holes were drilled by a truck-mounted Longyear 44 drilling rig. Each drill hole was wireline logged by Mon Karotaj LLC using geophysical equipment provided by AusLog of Australia. Long-spaced density, gamma, resistivity, spontaneous potential and caliper logs were run in all drill holes. These logs were used to identify the seam correlations and adjust the depths provided with the core samples. All cored sections were logged and sealed immediately by on-site geologists to prevent degradation of the coal and rock samples. Core losses were reconstructed from the wireline logs. All core samples from Chandgana Khavtgai have been shipped to SGS-CSTC Minerals at Tianjin, China. Red Hill Energy has commissioned a full range of coal quality analyses on the cored sections and assays will be made public by Red Hill Energy as they become available. However, Red Hill anticipates the quality will be generally similar to its nearby Chandgana Tal property which is low in ash, low in sulphur and has a heating value of 7,628 British thermal units per pound (BTU) or (4,238 kilocalories per kilogram). The two properties are likely part of the same large coal extent shared by the CVRD project. Red Hill's Ulaan Ovoo property in northern Mongolia is also a high-quality thermal coal with low ash, low sulphur and a heating value of 9,367 British thermal units per pound or 5,204 kilocalories per kg.
The algorithm used for generating the geological resource model is ABOS (approximation based on smoothing), a proprietary two-dimensional gridding algorithm which uses numerical tensioning and smoothing between data points to limit extrapolation in areas with few data points. The grid mesh size used for modelling the geology and topography is 20 metres and the coal tonnage calculations are based on a conservative default density of 1.40 grams per cubic centimetre. Geologic boundaries, including fault and outcrop locations, were based on surface trenches, geomorphology and downhole data, and were chosen conservatively.
Coal of quality similar to Chandgana Tal is considered to be a high-quality thermal coal highly desirable for power generation as well as coal to liquids conversion. Coal of comparable quality is currently being profitably mined in Mongolia, Russia and China.
Red Hill's Chandgana (Nyalga basin) coal deposits are amenable to low-cost surface mining operations. In both Chandgana projects, the coal is outcropping, offering easy access to the coal seams. The Nyalga coal basin is linked by road to Mongolia's capital Ulan Bator (300 kilometres to the west) and to the Mongolian Railroad (160 km to the west), providing direct rail access to China to the south and Russia to the north.
Red Hill coal discoveries to date are outlined in the attached table.
Measured and
Project/basin Measured Indicated indicated Inferred
(million) (million) (million) (million)
Ulaan Ovoo/(Northern basin) 174.5 34.3 208.8 35.9
Chandgana Tal/(Nyalga basin) 141.3 (none) 141.3 (none)
Chandgana(i) Khavtgai (Nyalga basin) 188.7 489.7 678.4 44.0
----- ----- ------- ----
Total 504.5 524.0 1,028.5 75.9
===== ===== ======= ====
(i) All figures represent tonnes
Red Hill's coal quality is demonstrated in the attached table.
Stripping Seam
ratio thickness
Project Ash (%) Sulphur (%) BTU/lb Kcal/kg (Avg) (Avg)
Ulaan Ovoo 11.6 0.37 9,367 5,204 2.0:1* 53.9 metres
Chandgana Tal 12.49 0.68 7,628 4,238 0.53:1 40.0 metres
Chandgana Khavtgai AP AP AP AP 2.1:1 45.4 metres
AP: assays pending
* first 140 million tonnes
Red Hill president Ranjeet Sundher stated, "Reaching the one-billion-tonne milestone in less than 24 months of Mongolian coal exploration is a testament to our people."
He added: "Going forward, Red Hill's goals remain unchanged, continuation of our projects, advancements towards production and continued exploratory drilling regionally."
Red Hill Energy's board of directors wishes to thank all its international colleagues in its Mongolian and Canadian offices for their hard work and dedication. Red Hill Energy is particularly grateful to its vice-president of coal projects, Eric Robeck, of Provo, Utah, whose vision and professionalism directly led to Chandgana Khavtgai's success.
Glenn S. Griesbach, PGeo, Red Hill's vice-president of exploration, is the qualified person who is responsible for the resource estimate at Chandgana Khavtgai and all other technical information provided in this news release. Mr. Griesbach has 29 years of international geological experience and has been active in Mongolia since 2003.
We seek Safe Harbor.
