12m mc, 3m cash, 400mt jorc!! 2bt target!!

Prospect One

414Mt JORC inferred resource
5.5m seams
21MJ/kg
30% Ash
1200Mt resource target

HDG will aqcuire 75% of the above by expending $0.5M, and spending $3M on drill costs over the next 24months, of which $1M must be spent in the first year.

HDG has the option to acquire a further 24% stake (net 99%) if it pays 10c for each tonne of measured (not inferred) resources and funds another $2M worth of exploration/development costs over a two year period.

In my opinion, this fee on the measured resource will be around $20M-$30M depending on the measured resource at the time. In two years, it will probably stand at around the 200Mt-300Mt JORC measured figure.

Total costs of approximately $3.5M for a 75% stake, and about $30M for a 99% stake.

Prospect Two

2.5m to 23.7m seams
~22.5MJ/kg
~28% Ash
1300Mt resource target

HDG pays an upfront fee of $0.02M for exlusivity to the deal until May 13. On election to take up the prospect, HDG can spend up to a threshold of $7M on exploration costs for the next 18 months.

At the end of this period (November 2012), HDG will pay between $6M and $9M dending on the JORC measured (not inferred) resource at the time.

Once this payment has been finalised, the remaining difference between the costs on the second prospect and $70M will be paid by HDG to acquire 90% of this second prospect, and 90% of any remaining interests in the company.

Total costs of $70M for a 90% stake.

Conclusion

At first this deal sounds confusing, but I can guarentee that this is an opportunity of a lifetime for this company.

HDG can expend $3.5M for a 75% stake at the first prospect which should itself have an inferred resource of around 1Bt in 6 months time. We can also expend a further 10cents for every JORC measured resource tonne of coal at the prospect, and pick up a lazy 99% stake in the prospect!

Furthermore, between $13M and $16M will be spent at the second prospect for exploration up until November 2012. At this time, any balance between the funds spent on the second prospect so far will be handed over to Jaguar to complete a $70M transaction. This would hand us a 90% stake in the second prospect!

Long story short, this is an absolute no brainer. The grades are comparitive with AFR who have gone on a massive run of recent times, and we have tonnages of coal coming out of our ears.

Think about this for a minute. Prospect one alone has a JORC inferred resource of 400Mt, and we can have 300Mt of it for ourselves if we pay a measly $3.5M, and we have just opened up a $3M debt facility to help this cause.

Thermal coal companies normally attribute an EV of 10cents-15cents per tonne of JORC inferred resource. That would value HDG right now at $30M of 60cents per share. If we infer up 1Bt of the stuff, then I see no reason for HDG to be trading under $1 in 6 months time. Infact I will go as far to say that this has such massive potential here that this will be a 10bagger in 12 months in my opinion.