Energy company Jatoil Ltd (ASX:JAT) has signed a binding letter of intent to acquire four coal exploration permits and permit applications in the Galilee Basin in central Queensland.

The deal strengthens Jatoil’s dual energy strategy currently being initiated through the pending acquisition of Blackrock Resources Pty Ltd, which holds interests in two coal assets in Kalimantan, Indonesia. Jatoil originally was formed to develop a biofuel business through the production of environmentally friendly crude jatropha oil from plantations in Indonesia.

Chief executive Phil Hodgson said: “Australian investors have responded positively to our announced move into coal. Now, we are taking an opportunity to make Jatoil even more relevant to local investors through the acquisition of valuable Australian coal tenements in the Galilee Basin.

“Our biofuel feedstock business continues to be of great importance” Phil Hodgson continued. “We see enormous potential developing during the next few years in our jatropha project in Central Java, and last week announced that we had hit a production milestone of 200 tonnes of crude jatropha oil. However, we need to boost shareholder value and the coal interests are the right fit for us right now to deliver that.”

The latest coal deal is with a private Australian company, Spinifex Rural Management Pty Ltd. Two of the exploration permits covered by the letter of intent are currently owned wholly by Spinifex, as are the two permit applications.

These four areas, covering over 550 square kilometres, are close to tenements held by Adani India’s project, Hancock Mining’s Galilee project development, Clive Palmer’s Minerology Waratah Coal project and Linc Energy tenements in the Richmond area, North Western Galilee basin.

These projects all contain very large in-ground resources. Several other Spinifex tenements in the Gallilee basin, as well as the Bowen and Surat basins, are also currently under exclusive negotiations between Jatoil and Spinifex.

The letter of intent covering the purchase of the tenement interests is conditional on Jatoil’s successful acquisition of Blackrock, satisfactory due diligence on the assets and the required shareholder and regulatory approvals. The headline price on completion of the deal will be $200,000 cash plus 5 million ordinary Jatoil shares, as well as up to 10 million performance shares on achieving a JORC Measured Mineral Resource of 40 million tonnes and a royalty of 1.5 per cent of gross revenue.