Colonial Coal announces combined results of recent preliminary economic assessments for Flatbed and Huguenot projects

The PEA for the Gordon Creek Project is the second such study to be completed for Colonial Coal’s coking and metallurgical coal projects during 2018; the first being that for the Huguenot coking coal Project (Huguenot).

Gordon Creek Project PEA

The Gordon Creek Project PEA Technical Report was prepared by Stantec Consulting Services Inc. (Stantec). In summary, Stantec used previously reported (27 November, 2017 and 16 January 2018 and by way of corresponding NI 43-101 Technical Report filings) metallurgical coal resources (reported by Norwest Corporation (Norwest)), developed a conceptual mine plan to exploit the coal resources using underground mining methods and prepared scoping-level cost estimates and economic analyses. In the highlights presented below, all costs are in US dollars; where Canadian dollar equivalents are provided, they have been converted using an exchange rate of US$1.00 equals CAN$1.30.

The Gordon Creek PEA is preliminary in nature and includes inferred mineral resources that are considered to be too geologically speculative to be subject to economic considerations that would enable them to be categorised as mineral reserves. There is no certainty that the forecast results stated in the Gordon Creek PEA will be realised.

• The Gordon Creek Project has an indicative after-tax (and royalty) net present value (NPV) of US$691 million (CAN$898 million) using a 7.5% discount rate, and an internal rate of return (IRR) of 24.4%, based on a weighted average coking coal price of US$164.8/t and a premium pulverised coal injection (PCI) coal price of US$140.5/t.
• The Gordon Creek PEA is based on a conceptual underground mine plan that targets 111.6 million ROM t of resource, with a yield of 51%, producing 57.4 million t of clean coal over a mine life of 30 years.
• Geological modeling and resource estimation of the Gordon Creek deposit have identified an inferred coal resource of 298 million t.
• In full mine operation, projected clean coal production ranges from 1.6 million tpy to 2.6 million tpy, and averages approximately 1.9 million tpy.
• The pre-production capital cost for the underground mine is estimated at US$300 million (CAN$391 million), with additional sustaining capital of US$406 million (CAN$528 million) over the life-of-mine (LOM). The proposed payback of initial capital is estimated to be within three years from the start of coal production.
• The Gordon Creek project’s total cash operating cost is estimated at US$80.91 (CAN$105.19) per clean coal tonne. This includes direct mine site costs of US$41.16/t, offsite costs (transportation and port charges) of US$25.42/t and indirect costs of US$14.33/t.

Huguenot Project PEA

The Huguenot Project PEA Technical Report, was prepared by Norwest now Stantec Consulting Services Inc. (Stantec). In summary, Stantec used previously reported (24 September 2013 and by way of corresponding NI 43-101 Technical Report filings) coking coal resources and conceptual mine plans taken from a PEA prepared by Norwest, to exploit the coal resources using a combination of open pit and underground mining methods. The 2013 study was up-dated by preparing current scoping-level cost estimates and economic analyses. In the highlights presented below, all costs are in US dollars; where Canadian dollar equivalents are provided, they have been converted using an exchange rate of US$1.00 equals CAN$1.30.

The Huguenot PEA is preliminary in nature and includes inferred mineral resources that are considered to be too geologically speculative to be subject to economic considerations that would enable them to be categorised as mineral reserves. There is no certainty that the forecast results stated in the Huguenot PEA will be realised.

• The Huguenot Project has an indicative after-tax (and royalty) NPV of US$1166 million (CAN$1516 million) using a 7.5% discount rate, and an IRR of 33%, based on a coking coal price of US$172.0/t.
• The Huguenot PEA is based on conceptual open pit and underground mine plans that target 122.3 million ROM t of resource, with a yield of 73%, producing 89.3 million t of clean coal over a mine life of 31 years.
• The conceptual open pit mine plan targets 56 million ROM t of resource at an average stripping ratio of 8.6 :1 (bank cubic metres:ROM tonnes) while the conceptual underground mine plan targets an additional 66 million ROM t of resource. The open pit operates during Years 1 - 14 while the underground mine would operate during Years 3 - 31, with both the open pit and underground mine operating simultaneously during Years 3 - 14.
• Measured and indicated coal resources total 277.7 million t (132.0 million t surface plus 145.7 million t underground). Inferred resources total an additional 119.2 million t (0.5 million t of surface plus 118.7 million t underground).
• In full mine operation, projected clean coal production from combined surface and underground mining operations ranges from 1.4 million tpy to 5.9 million tpy, and averages approximately 3.0 million tpy.
• The pre-production capital cost for the proposed surface and underground mine is estimated at US$661 million (CAN$859 million), with additional sustaining capital of US$178 million (CAN$231 million) over the LOM. The proposed payback of initial capital is estimated within 5 years from start-up of operations.
• The Huguenot Project’s total cash operating cost is estimated at US$106.96 (CAN$139.05) per clean coal tonne. This includes direct mine site costs of US$67.20/t, offsite costs (transportation and port charges) of US$28.30/t and indirect costs of US$11.46/t.

Austin stated: “During the past six months Colonial Coal has completed PEA studies for each of its 100%-owned Huguenot and Flatbed Projects which are located in northeastern British Columbia. The completion of the PEA for the Gordon Creek Project represents a significant milestone in the advancement of this Project and the updated PEA for Huguenot supports, at a PEA level of confidence, that Project’s potential to become a stand-alone mine development”.

Read the article online at: https://www.worldcoal.com/mining/09012019/colonial-coal-announces-combined-results-of-recent-preliminary-economic-assessments-for-flatbed-and-huguenot-projects/