"The first-stage catalytic reactor, a purpose-built vessel in which the pyrolysis reaction for converting lignite into fuel oil occurs, has been delivered to the Centre for Fuels and Energy at Curtin University of Technology in Perth," Spitfire said yesterday.

"Drill core samples will be processed through the reactor to determine optimal reaction conditions for the lignite."

The company is also about to start drilling at Salmon Gums to further refine its Joint Ore Resources Committee-defined resource, which is inferred as being more than 500 million tonnes.

According to Spitfire, a lignite, or brown coal, resource of this size could provide over 200 million barrels of liquid fuels.

"The drilling will focus on an extensive infill drilling program in 2008 and 2009 to further refine the current JORC resource and a step-out drilling program to substantially expand the resource estimate and the recoverable oil inventory," Spitfire said.

The step-out drilling will assess several unexplored zones identified recently by the company's consulting geologists, CSA Australia, after the completion of an airborne Electromagnetic survey last month.

Depending on the results of feasibility studies over the next 20 months, Spitfire plans to establish a mine and construct processing facilities that will use its proprietary Lignite2Value (L2V) conversion process.

"Subject to commercial and technical feasibility and subsequent financing, the group intends to produce between 5000 and 20,000 barrels of oil and distillate products per day (which equates to 1.7 to 6.8 million barrels of liquid products per year) as well as associated by-products including electricity, activated carbon and metallurgical char," the company notes on its website.