Could Bandanna Energy Be Queensland's Next Big Coal Producer?

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Researched by Industrial Info Resources (Sugar Land, Texas)--Bandanna Energy Limited (ASX:BND) (Brisbane, Queensland) is sitting on one of the largest coal resources in all of Queensland to be compliant with the Joint Ore Reserves Committee (JORC). Queensland is the world's largest exporter of seaborne coal, with an estimated 32 billion tonnes in ground reserves, and Bandanna's current 1.4 billion-tonne resource is the largest thermal coal resource of any exploration company listed on the Australian Securities Exchange.

Bandanna has advanced development projects in both the Galilee and Bowen basins, which are home to the majority of the state's coal reserves. The largest of these projects is the South Galilee project, which is directly to the south of Hancock Coal's (Brisbane, Queensland) Alpha and Kevin's Corner projects, and Waratah Coal's (Brisbane, Queensland) China First project. These are multi-billion dollar projects and give a good indication of what can be expected from the South Galilee project.

The project is a joint venture between Bandanna Energy and AMCI Capital (Greenwich, Connecticut), with AMCI having the option of earning up to a 50% interest by funding up to $25 million in exploration. The joint venture partners are progressing with feasibility study work on the project and are looking at constructing a dual open-pit and underground operation, along with a 20 million-ton-per-year coal handling and preparation plant (CHPP), although with the size of the resource there is a very real possibility of this being expanded in the future. The only major roadblock at the moment is the lack of suitable rail infrastructure in the area. Both Hancock and Waratah are planning rail lines of their own, and Bandanna will be hoping to arrange either a joint development arrangement or usage arrangement with whichever company is first out of the blocks.

The South Galilee project is the largest single resource that Bandanna is involved in, but it is definitely not its only major potential project. In the adjacent Bowen Basin, Bandanna is progressing with early development work at its fully owned "Golden Triangle" projects. The Golden Triangle consists of the Springsure Creek, Arcadia and Arcturus deposits, all of which are within 50 kilometers of each other. The three projects represent a current 750 million-ton, JORC-compliant resource, and Bandanna is looking into the feasibility of creating either one large, integrated production facility with interconnecting overland conveying, or three smaller, individual operations. The three projects combined have the potential to produce another 20 million tons per year of thermal coal for export, and Bandanna already has received a 4 million-ton-per-year allocation at the proposed Wiggins Island Coal Terminal, which should be complete by early 2014. Bandanna is applying for further capacity allocations as part of the eventual coal terminal expansion, with the lack of export capacity being the only major hurdle in the way of the Golden Triangle development.

As if aspiring to develop 40 million ton-per-year of coal production was not enough for a junior exploration company with no operational mines, Bandanna also has a smaller deposit to the east of the Golden Triangle projects, Dingo West. The Dingo West project is the smallest of the company's current assets, and Bandanna is looking at possibly pushing it into production as soon as possible. Production would be around the 1 million- to 2 million-ton-per-year mark, and studies are under way as to the best way to bring this along as quickly as possible, whether that be by way of exporting unwashed coal, utilizing a third-party toll-washing arrangement, or building a small wash plant on site.

For a company that has only be listed on the Australia Securities Exchange since September 2008, Bandanna Energy already has shown itself to be a potential major player in the largest coal-producing area in the world. It will be very interesting to see how it progresses in the near and long term, and what other potential opportunities is presents in the future.

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