NRE acquires 20 pc stake in RRL
(The West Australian, October 27, 2005)

India's biggest coking coal miner, Gujurat NRE Coke, has taken a cornerstone 20 per cent stake in explorer Rey Resources in the hope of identifying WA's first commercial deposit of coking-quality coal in the Canning Basin, south-east of Derby.

Led by former BeMax Resources chief Julian Ludowici, Rey has been trying to raise $10 million at 25¢ a share to float the company since August, primarily to explore its big Liveringa coal project in WA's far north. It also currently holds the big but marginal Irwin River coal deposits near Geraldton, previously held by CRA and Precious Metals Australia.

Ludowici said yesterday that regulatory issues in North America had temporarily stalled Rey's float, effectively freezing the issue of about $6 million in stock promised to Canadian investors, forcing the company to revamp capital raising plans and focus on east-coast investors.

But Rey's Canadian adviser, Royal Bank of Canada, had introduced the company to Gujarat NRE Coke, which has been aggressively acquiring Australian coal assets over the last year and now has stakes in three east-coast mines.

Ludowici said Gujurat NRE had acquired 14 million shares for $1.9 million, giving the company almost 20 per cent of the fledgling explorer ahead of the float.

Gujurat's vice-chairman would soon join Rey's board and the Indian group would also have `first right of refusal' to enter an offtake agreement from any development of Rey's coal assets.

The Indian miner's primary interest was in Rey's 4000sqkm Liveringa leases, 140km from Derby, where a 15m thick coal seam had been identified 200m from the surface during a review of past oil drilling in the region. Coal seams had also been traced over a strike length of 170km. BHP Billiton, which previously evaluated the Liveringa results, lost interest in the project after a desktop study found little prospect for a world-class coking coal deposit.

But Ludowici said coking coal prices had soared since BHP made its last assessment in 2003 and that lesser-quality reserves were now increasingly in demand from steelmakers in nations such as India and China. BHP also made its assessment in comparison with its rich coking coal assets in Queensland's Bowen Basin, widely considered the source of the world's best-quality coking coal.

Rey had recently confirmed the presence of the 15m seam at Petaluma and had extracted fresh core samples to determine coal quality, while its next step would be to target possible outcrops of the coal measures more amenable to low-cost extraction.

`The geology is right for coking-quality coal, but we won't know until we've have had the current samples analysed,' Ludowici said. `BHP probably have the world's best coking coal and really don't want anything that doesn't meet their standards, whereas the Indians are prepared to take a less rigorous view than BHP.'

Indian miners had also recognised the need to act quickly to snap up mineral opportunities in Australia, given the increasing competition in the current commodities boom.