Red Hill to sample Ulaan Ovoo coal

Red Hill Energy (RH-V) is combining a bulk sample program with an open pit expansion program at its Ulaan Ovoo coal project in Mongolia.

Meanwhile, the company will be continuing with a prefeasibility study for the project, which Red Hill says should be complete within four months.

Before coal extraction for the bulk sample, the coal seam’s full thickness will be exposed along the entire width of the surface outcrop and excavated enough to show bright un-weathered coal.

The sample will be sent to Tianjin, China, for detailed analysis. Over a span of three to four weeks, SGS Labratories will do a range of chemical and physical tests to see how Ulaan Ovoo coal would perform in a modern power plant.

Red Hill says its already been approached by potential coal buyers that would like see the data from the tests and some would like to conduct their own bulk samples for their own tests.

The company expects that the tests will reconfirm the coal as low ash, low sulphur and high energy content needed for clean and high efficiency coal-fired power plants in East Asia.

The project has a measured and indicated resource of 208.8 million tonnes of thermal coal and another 35.9 million tonnes under the inferred category.

A 2006 technical report suggested the project could support a 6-million-tonne-per-year operation over a mine life of 20 years although with additional resources not counted in the estimate, the project could be continued for a total of 34 years.

The stripping ratio for the first 120 million tonnes of coal would average about 1.4 to 1.

Red Hill has already been granted a 30-year mining licence by the Mongolian government with a 40-year extension option.

Ulaan Ovoo is located about 17 km south of the Russiain border and is within 120 km of both Russia’s and Mongolia’s central railroads.

The company points out that should it reach production, Ulaan Ovoo is in a good location for shipping coal to Japan, Taiwan and South Korea, which are three of the world’s major coal-importing markets.

Red Hill also holds the Chandgana coal project in east-central Mongolia as well some uranium, gold and copper exploration projects.

Red Hill shares were trading at 75 apiece today, down 2 on a trading volume of 294,000 shares. The company has a 52-week low of 55, a high of $1.45 and 47.5 million shares outstanding.