Galway Resources has entered into an exploration and joint venture agreement with Prodeco, the Colombian coal subsidiary of Xstrata, for the GALCA coal project in Colombia. The GALCA coal project comprises 132,000 hectares that could host a new undiscovered coal basin that occurs close to surface. A 19-hole drilling program has begun for the first phase of exploration, this will be funded by Prodeco. This drilling program will be focused on the two areas (the northern flank, and the southeastern portion) that appear to have the highest prospect of coal near the surface.
"We are very pleased to have Prodeco as a joint venture partner and to aggressively explore and realize the full potential of GALCA. This area has the potential to host several new coal deposits with great existing infrastructure. The upside could be tremendous," cites Robert Hinchcliffe, President and CEO of Galway Resources.
GALCA Deal Terms
The terms of the GALCA exploration and joint venture agreement include the following: Prodeco will fund the first 19 drill holes, up to $7.5 million, and in consideration for agreeing to fund the feasibility drilling program thereafter will earn 60% of the project. Prodeco will then earn the remaining 40% in the project by paying Galway $0.80 per ton of economically viable coal tonnage up to $70 million. The feasibility costs that are not associated with drilling with be spent based on a pro rata basis.
Good Infrastructure
The GALCA project comprises 77 concessions (132,000 hectares) and is located in the Cesar State. The project has very favorable infrastructure, with the Fenoco rail line running through the middle of the concession area, and the Rio Magdalena river and the National Road to the Caribbean coast and ports running along the western edge of the project. Extensive analysis has been conducted over several months studying various seismic data and other geological analysis derived from petroleum drilling carried out over the years.
Geological analysis indicates the presence of coal and this land package was put together targeting the areas where it is believed that coal is closest to the surface. As such, the focus for the 19 hole drilling program will be on the more prospective northern and southeastern flanks.
Block 1.- Located in the eastern portion of GALCA, at the boundary between the alluvial lowlands of Magdalena River Basin and close to the slopes of the Oriental Range of the Andes. The block was determined using the geological sections C - C', D - D' and F - F', also developed with data from oil exploration wells and geophysical lines, covering 16,000 + acres. Within the boundaries of Block 1, Galway located the first 10 drill holes (600 m. each) targeting the eastern border of the basin, with extension and structure comparable with known mines with reserves of hundreds of million tons in northern Cesar.
Block 2.- Located in the northern portion of GALCA, near the town of Pelaya. This block was defined using the geological sections A-A', B -- B' and E - E' built upon the data of several oil exploration wells and geophysical lines, covering approximately ~20,000+ acres of land. Galway proposes to drill 9 holes (600 m. each) targeting the northern limit of Los Cuervos formation.
Colombian Coal Overview
After doubling the production and exports of coal in recent years Colombia is the largest exporter of coal to the United States, and is by far the largest coal producer in Latin America. More specifically, the total annual coal production is about 70 million tons and that figure is expected to double by 2015 as levels of foreign direct investments continue to increase with high energy prices. Colombia is recognized for its vast, high grade coal resources along with its highly motivated and skilled labor force.
GALCA Project Presentation