Exploration firm Northern Star Resources has discovered thermal coal between its Paulsens and Ashburton gold projects in Western Australia.
The company said the Kazput discovery was made during reconnaissance drilling targeting palaeo-channels, which it thought may feature gold.
Initial exploration suggests the coal target could be between 340 to 615 million tonnes.
Drilling indicated thermal coal intersections varying in thickness from 12m to 65m recorded in eight aircore drill holes, four of which ended in coal.
The discovery lies below soft overburden ranging from 32m to 73m in thickness.
Northern Star has appointed Xenith Consulting to conduct a preliminary analysis of the coal seams.
Xenith's preliminary analysis suggests the resource is a low-rank thermal coal similar to that mined in Indonesia and currently exported to India and China.
Northern Star said it will remain focused on gold but plans to develop its coal assets via a joint venture, in-specie distribution of shares in a separate company or sale.
About A$2m has been allocated to undertake sufficient drilling to establish the maiden resource.
A programme of follow-up drilling has already started on a 1,000m by 500m pattern to underpin the data requirements for a detailed geological model and potential resource estimate.
The drill programme is expected to be completed in the second quarter of 2014.
Northern Star managing director Bill Beament said the discovery of a substantial coal deposit on the company's Pilbara tenements offered significant potential for shareholders.
"Initial indications are that this is a potentially valuable find with the scope to emerge as a large-scale thermal coal deposit," Beament added.
"While being disciplined in our spending, we propose to establish a Joint Ore Resources Committee-compliant resource estimate and undertake the preliminary preparations for a corporate solution to potentially monetise our discovery."
Image: The thermal coal discovery is well located with respect to infrastructure, lying within proposed rail corridors and close to the sealed Nanutarra Road. Photo: Courtesy of Northern Star Resources.