Lucky Strike Resources (CVE:LKY) reported Wednesday that it has signed definitive agreements with five private Mongolian companies to acquire an 80% stake in six mining exploration licenses and coal properties.
The Choir-Nyalgia properties, which encompass an area of 13,096 hectares, are situated 170 kilometres from the Trans-Mongolian Railway.
Under the agreement's terms, Lucky Strike will pay vendors US$5.8 million in cash to acquire the 80% interest in the Choir-Nyalgia properties and commit US$2.5 million in exploration expenditures.
Lucky Strike said it already paid non-refundable deposits of US$100,000 to certain vendors, and upon the acquisition's acceptance will make additional cash payments of US$400,000.
It is estimated that Mongolia has potential coal resources of 162.3 billion tonnes, and 20.3 billion of coal resources in the Choir-Nyalgia coal basin, which exported 18.2 million tonnes of coal last year, Lucky Strike said.
"Mongolia has vast coal resources with significant potential at an early stage of development in the nation's mining industry," said Lucky Strike’s chairman and chief executive officer, Cathy Fong.
"Lucky Strike's decision to acquire coal exploration licenses within the Choir-Nyalgia coal basin was based on favourable geological conditions."
Further, as part of developing the properties, it intends to carry-out a drilling program to determine the extent of the mineral resource potential.
Additional geological, engineering and feasibility studies are expected to be required to assess whether the Choir-Nyalgia coal properties have the economic potential to ship product to Ulaanbaatar, and to be a fuel source for a power generating plant.
The acquisitions are subject to TSX approval, as well as legal and technical due diligence.
Lucky Strike's shares rose 30 cents, or 4.29% to $0.73 in Wednesday’s afternoon trading session.