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Morien issues update on Donkin coal mine

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World Coal,

Morien Resources Corp. has received notice from Kameron Collieries ULC, the owner and operator of the Donkin coal mine in Cape Breton, Nova Scotia, that it has been granted approval by the Nova Scotia Department of Labour and Advanced Education (LAE) for a revised ground control procedure, which allows for the continuation of mining and development operations at Donkin.

Kameron announced in early January 2019 that LAE had rescinded its approval of the existing ground control procedure at Donkin due to a fall of ground. No workers were injured nor equipment damaged. Kameron submitted a revised ground control procedure and mine plan to LAE in late January and was subsequently granted approval to recommence mining on a limited scale. Since that time, Kameron has operated on a limited basis at a reduced capacity using the interim ground control plan.

With the recommencement of normal operations at Donkin, Kameron currently has two fully operating coal sections. These include one section with a recently installed flexible conveyor train, which is a continuous haulage, mobile conveyor belt that replaced the shuttle car fleet in that section. The second coal section is using a traditional shuttle car fleet. Both coal sections are actively developing the mine’s main underground infrastructure and first production panel.

Morien owns a gross production royalty for the mine of 2% on the revenue from the first 500 000 t of coal sales per calendar quarter, net of certain coal handling and transportation costs, and 4% on the revenue from any coal sales from quarterly tonnage above 500 000 t, net of certain coal handling and transportation costs. The royalty is payable to Morien on a quarterly basis over the anticipated more than 30 year mine life.

Morien’s royalty payments from Kameron increased from CAN$4000 in 2Q17, when production at Donkin commenced, to CAN$298 000 in 4Q18. During Q1 2019, while production was temporarily suspended and while Kameron operated at a reduced capacity, Morien’s Donkin royalty decreased to CAN$169 000. At full production of 2.75 - 3 million saleable tonnes per year, and using a wide range of coal pricing (CAN$60 - 120/t), royalty payments to Morien could be in the order of CAN$5 million - 9 million/yr.

In January 2019, it was reported that Provincial Energy Ventures Ltd. (PEV) is proceeding with the first phase of its CAN$75 million expansion of its export facility in Sydney, Cape Breton. PEV is located approximately 30 km from the mine and is currently responsible for handling all of the exported coal from Donkin. Once complete, the PEV port will be capable of accommodating larger vessels and is expected to have the capacity to export up to 3 million tpy of Donkin coal. A new, dedicated coal haul road that will by-pass certain communities along the current truck route between Donkin and PEV is expected to be complete during the 1H19.

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