Modun Resources (ASX: MOU) has upgraded the JORC resource at its Nuurst Project in central Mongolia, with 326 million tonnes now in the high confidence Measured category.

This comes hot on the heels of a recent offtake deal executed with Asia-focused commodity trading house, Tennant Metals.

The total resource, compiled by consultancy CSA Global, now stands at 478 million tonnes of sub-bituminous coal.

Further upside is the substantial increase in the calorific value to 4,768 kilocalories per kilogram on an air dried basis, up from 4,113 kilocalories per kilogram previously.

CSA’s work also highlights thick coal seams close to the sub-crop that indicate very low strip ratio coal below 1:1 in a significant portion of the resource area.

The updated resource re-affirms the potential for a large scale coal supply close to transport infrastructure and a major world market in China.

Nuurst is located 6 kilometres from existing railway infrastructure, 120 kilometres south of the Mongolian capital, Ulaanbaatar, and is 600 kilometres by rail from the Chinese border.

Modun now plans to work towards defining a JORC reserve as the company works towards mine development.

Offtake partner Tennant Metals will also now begin marketing the Nuurst coal to potential customers in Mongolia and China.

Under the offtake agreement, Tennant will have exclusive rights for 15 years to purchase all of the thermal coal produced at Nuurst available for sale to the export market, and a minimum of 50% of the thermal coal produced available for sale to the domestic market.

The price paid for all coal sales will be at market rates at the time of the sale.

Nuurst coal has been shown to be primarily suitable for power production and is likely to be analogous in quality parameters to Indonesian sub-bituminous thermal coal, which is a high growth sector of Chinese coal import demand.

Modun has previously submitted an application for resource registration, which is the first step in the process of converting the Nuurst licence from an exploration licence to a mining licence.

The application is currently being reviewed by the Mongolian Government and a decision is expected in January 2013.

A mine plan has outlined an operation of 90 million tonnes at a rate of 3 million tonnes per annum.