aqc/rio/peabody

Drilling has commenced today on EPC 1827. This EPC1827 is where they have a 107m tonne JORC resource of semi soft coking coal and PCI coal next door to MDL162 that had 221m tonnes which macarthur coal paid $325m for. Under the new mining rules you must have 50% of your resource in the reserve category as opposed to indicated and inferred to be granted a mining license. AQC resource is all in the inferred category at the moment , however this drilling program should get them to the required 50% as a measured reserve ie highest confidence and get the MDL granted. The coal seam on Macarthurs MDL 162( now Peabody) is the same seam that runs through AQC ground. UBS analyst estimated that Macarthur paid $1.80 per tonne of measured resource back when the deal was done a few years ago, If AQC end up with 50m tonnes in measured category of the 107m and even halving the per tonne value due to decline in coal price still gives a figure of around $45m ( 50m * $0.90) vs current market cap of just $9m for AQC. The question is whether AQC project is big enough as a stand alone project or would be better as an add onto to surrounding projects. Either way , should the drilling program prove successful, the stock looks materially undervalued on EPC 1827 alone.
AQC has also indicated RIO Tinto will soon commence exploration on the AQC/RIO J/V with a 5 hole program planned once heritage/access approvals are finalised. Given Rio are looking to extend life of nearby Hail Creek coking coal mine, it would be hard to believe they would mess around for anything less than 1B tonne exploration target. I am not sure how much of this falls on the J/V Hillalong tenements , however even it was 30% we are still looking at a major coking coal tonnage for AQC vs current micro cap. Clearly RIO has high expectations for this ground as I am not aware of any other junior coal company that has formed a J/V with Rio Tinto. Unfortunately it has taken along time for this J/V to get going, however recent AQC update indicates that we are getting close. Recent funding deal with Lind Group Australian Special opportunities fund, while not ideal at least means these two flagship assets can be further progressed in the near term which should hopefully see substantial uplift in the share price from these ridiculously low levels.