what guf didn't say, and what you should know

GUF like to keep their cards close to their chest when it comes to Hughenden. There is no better example than what we saw today. A majority of their presentation which was launched on the back of the exploration target, had more to say about their other assets than the north Galilee Basin prospect itself. I have a sneaking suspicion why this may be the case, but all shall be revealed in due course and good time.

Here is what they didn't tell us, and what you should know.

1. Firstly, very little historical exploration activity has taken place within the boundaries of the Hughenden tenement to the west of EPC1300, and to the south east of EPC1477. Furthermore, most of the historical drilling taken place in this region prior to GUF moving in was done so to only a depth of approximately 100m, missing out on a lot of the thick coal seams which are situated at depths of ~400m+. In other words, only approximately 25% of Hughenden has been touched with historical drilling, and, of that, very little was done so to a reasonable depth. For an extensive look at what sort of historical exploration has taken place in the North Galilee Basin, please refer to the back half of the prospectus for up and coming coal junior BAC.

2. While a fair degree of extrapolation is done with exploration targets, there is absolutely no way that they could extrapolate the data from one borehole, and assume a similar layout 100km elsewhere. Geological occurrences such as oxidation lines, faulting and sedimentary dykes are very much location specific.

So what do these two points boil down to, I hear you ask.

For the consultants to have compiled a credible exploration target, they simply could not have accounted for a large part of Hughenden. I dare say the exploration target covers hardly much more than 25% of the prospect.

At risk of contradicting everything I said above about extrapolation and geological occurances, allow me to speculate a little.

You may remember that a month or so ago I looked at the resource:land ratio of all the companies working in the Galilee Basin. Every single resource was on the same order of magnitude except Adani's which was a notable standout to the upside.

The consultants were very much restricted in compiling this exploration target because they have to play strictly by the rules. On little old HC we can bend the rules a bit, and if prior trends in the Galilee Basin are anything to go by, then I reckon we could achieve the high mark of that target (4Bt+) with just 2 of the 14 Hughenden tenements that CAP has a working interest in. EPC1477 will be one of those two tenements, and will have a JORC by the end of the year if GUF are being truthful about their intentions for once.

In a nutshell, the high mark of the exploration target could easily increase three-fold over the coming two years in my opinion.