West Hawk eyes Groundhog coal

Vancouver — With the booming demand for coal driving up prices, copper explorer West Hawk Development‘s (WHD-V) is making a foray into the coal sector. The company has agreed to purchase 10 metallurgical coal exploration licences in the Groundhog coalfield of northwestern British Columbia for roughly $9 million in cash and shares.

The Groundhog coalfield in the Bowser Basin consists of mostly low-volatility pulverized injection coal (PCI), which usually fetches more than US$100 per tonne.

The licences encompass 57.5-sq. km located about 140 km northeast of Stewart, B.C. West Hawk agreed to pay the vendor, Clive Brookes, $250,000 and issue 500,000 shares within six months, which would be followed by annual payments of $125,000, beginning in November 2006. The payments would increase to $200,000 in 2009 and 2010, by which time West Hawk will have earned a 75% interest. The company could then purchase the remainder for $5 million.

The project is subject to a royalty of $1.50 per tonne, which could be reduced to $1 per tonne for $3 million in advance.

The properties are located some 1,235 km by rail northeast of the Ridley Island coal terminal in Prince Rupert, B.C.

Groundhog has witnessed intermittent exploration since its discovery in the early 1900s but development hinged on getting rail access. A rail line runs within 30 km of the southern boundary of the Groundhog properties and West Hawk says that Canadian National Railway is proposing to extend the track through the Groundhog project as part of an effort to access Fortune Minerals‘ (FT-T) Mt. Klappan coal project, situated some 50 km north.

Mt. Klappan contains anthracite coal resources in four deposits situated 150 km northeast of Stewart, and is undergoing environmental permitting.

Previous work on the Groundhog property, predating National Instrument 43-101, was conducted by the Geological Survey of Canada in 1948 and BC Hydro 29 years later. BC Hydro defined an open-pit resource of 46 million tons to 100 ft. below surface in the Lower Discovery Creek area, and inferred another 290 million tons underground. The power company was looking for coal to support a planned 500 MW thermal power plant.

Interest in the property gained momentum in the 1980s when Gulf Resources and Suncor Energy (SU-T) estimated 1.538 billion tons of inferred resources at Groundhog.

Washed coal from trenches and core, at a specific gravity of 1.75, averaged 82% carbon, 10% ash, 7% volatile matter and 0.6% sulphur.

Plans call for an independent review of historical data to define a resource estimate compliant with NI 43-101. The company hopes to obtain a bulk sample for further testing.