Rey holds 18 coal exploration licences (13 applications and five granted tenements), in the Canning Basin, Western Australia. The area covered by the tenements is 3,970km² located 140km south-east of the port of Derby and therefore relatively close to prospective Asian markets.

Rey commissioned a report on the extensive seismic data obtained as a result of previous oil exploration. This data was used to map the depth of the prospective coal horizons away from the Petaluma #1 oil well. From the petroleum well data, several areas have been identified as being suitable for follow-up work. The most interesting was in the western Fitzroy Trough, based on an intersection of 15 metres of coal from 195 metres to 210 metres in Petaluma #1 (refer to map, below). This coal is in the Early Permian Liveringa Group and may be equivalent to the coal seam previously discovered at Liveringa Ridge. Potential exists for the prospective horizon to occur nearer to the surface.

In May 2002, Blackfin Pty Ltd, now a wholly owned subsidiary of Rey, entered into an option agreement with BHP Billiton Minerals Pty Limited (“BHP”) to review the Canning Basin in Western Australia for coal prospectivity. International Coal Consulting Pty Limited carried out the work which included a review of all previous work in the Canning Basin that bears upon coal occurrences, including government reports and maps, company reports, oil well data, open file reports and their compilation into a single, comprehensive status report with prioritised potential drilling target areas.

Compared to the Bowen Basin in Queensland, and Sydney Basin in NSW, the Canning Basin has been the subject of only minor coal exploration. The main activity has been petroleum and metals exploration. Possibly the first recorded mention of coal in the Canning Basin was an occurrence of hydrous bituminous coal reported at a depth of 50 feet in a water well at Liveringa Station in 1909. The seam was 12 feet thick.

Rey has had access to all coal exploration reports on open file, and to all petroleum wells drilled in the Basin. The open file coal reports were useful in gaining an understanding of the extent of exploration activity and the stratigraphic intervals that were investigated for coal.

Some 222 oil wells have been drilled in the Canning Basin and all of these have been reviewed. Significant coal occurrences were found in the Cretaceous, Jurassic, Triassic and Permian sediments of the basin. Almost all significant coal intersections were in the western half of the basin and occurred in virtually all of the major structural elements including the Lennard Shelf, Fitzroy Trough, Jurgerra Terrace, Broome Arch, Willara Sub-Basin, Kidson Sub-Basin and the Ankatell Shelf. This widespread occurrence of coal contrasts with the lack of conventional coal exploration in all but the Fitzroy Trough and Wallal Embayment.

BHP reviewed all petroleum well data from Petaluma #1, including vitrinite reflectance measurements, Landsat, and fluorescence, but subsequently withdrew from the agreement which gave it the option to acquire the project from Blackfin Pty Ltd in June, 2003. BHP’s decision was based primarily on its view that the coal section in Petaluma #1 was not “high rank coking coal”.

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