The Government’s Crown Minerals unit recently awarded the Christchurch-based company petroleum mining permit 50100 for a period of 40 years over an area covering 170 square kilometres north, south-east of Greymouth on the West Coast.

If Macdonald’s initial investigations confirm the presence of thick and gassy coals it intends building a production pilot in the second quarter of 2008.

Project manager Alberto Kamenar said the project would initially target coal seams 200-1000m deep, and PMP 50100 has “all the right ingredients” to become a successful CSM development.

“Our current evaluation suggests a gas recovery in the order of 175 billion cubic feet and these reserves could be targeted for delivering power to the national [electricity] grid,” he said.

A successful project could supply enough CSM to run a 20-50MW generation facility.

“Our schedule is to drill two core holes in the central part of the permit before the end of this year to assess the gas content and permeability of the Brunner and Paparoa coal seams,” said Kamenar.

He said the new production licence was essentially the same as the old exploration licence PEP 38508.

“In our work program, we have committed to test two areas that were not fully evaluated before, and that also have development potential.”

According to Crown Minerals, the permit work program requires further exploration wells, followed by at least four or five appraisal wells for a long-term production test pilot in the central and southern areas by the fourth and fifth year respectively.

In the north-eastern area, long-term appraisal is not required until the seventh year.

After long-term testing in each of the areas, an ongoing program of mining can be negotiated or part of the permit surrendered.

Kamenar said MIL and Chartwell NZ – another private company with significant expertise in CSM exploration and development – had recently applied for two new large exploration permits – a 8722sq.km block on the West Coast and a 3667sq.km area in Waikato – both over existing coal fields.

“The plan is to first review the geological data available and, in the first two years, record seismic and drill up to two wells to confirm the presence of suitable coals.”

Kamenar said MIL was one of the early pioneers of CSM in New Zealand, having held exploration acreage for many years.

It was established in 1978 and is owned largely by shareholders of RC Macdonald Ltd, a Wellington-based international trading company.