Hunnu Coal (ASX: HUN) has been granted an option to acquire an 80% interest in the Erdenes Thermal Coal Project (EL14733) which is located in the Dornogobi Province of south eastern Mongolia.

The Project is located 380 km from the capital city of Ulaanbaatar and 56 km from a bulk commodity loading rail facility at Bor Undur, which is connected to the Mongolian railway grid.

Exploration work carried out in 1978 discovered coal bearing Lower Cretaceous Khukhteeg Formation distributed throughout the property.

George Tumor, Managing Director, said "the Erdenes Coal Project is strategically located in a producing high quality thermal coal basin, where mines can be quickly brought into production to deliver thermal coal to both domestic and Chinese export markets."

Test pits discovered high quality coal seams, with Q = 5,120 to 7,310 kCal/kg, S = 0.11% to 0.63%, Ash = 14% to 38.5% and Moisture content = 8.6% to 12.4%.

A single drill hole intercepted a coal seam of eight meters in thickness from 1.5 m depth.

The company has an exploration target of 40Mt to 60Mt for the Erdenes Coal Project based on existing exploration work.

There are two existing coal deposits in the surrounding area. The Khashaat Khudag Coal Deposit located 8 km to the north east of the Erdenes Coal Project hosts approximately 140Mt to 180Mt of coal, with an average of 5,500 kCal/kg.

The Olongiin Ukhaa Coal Deposit is located 4.5 km to the south of the Erdenes Coal Project and hosts 80Mt to 90Mt of coal.

Exploration work carried out at the Erdenes Coal Project included 60 cubic metres of pit sampling and a single drill hole to 12.5 metres depth. The exploration was carried out in the northern part (pit 1 to 6), and at southern part (pit 9 to 20 and drill hole DH49) of the license.

The average depth of the pits was three meters and coal was detected in six of the pits. Drill hole DH49 intersected an eight metre thick coal seam from 1.5 metres depth.

A total of five samples (taken from one drill hole and 4 pits) were analysed by the company for basic coal parameters.

Hunnu Coal is currently planning an active exploration programme on this project and its other coal projects.