Colonial Coal Announces Results of a Preliminary Economic Assessment and Increased Resources for Its Huguenot Project
September 24 2013 - 8:00AM
Marketwired Canada
Colonial Coal International Corp. (TSX VENTURE:CAD) (the "Company" or "Colonial
Coal") - David Austin, Colonial Coal's President and CEO, is pleased to announce
the results of a recently completed Preliminary Economic Assessment (the "PEA")
for the Company's 100% owned Huguenot metallurgical coal project (the "Huguenot
Project") located approximately 85 kilometres southeast of Tumbler Ridge in
northeast British Columbia.
The PEA report, prepared by Norwest Corporation ("Norwest") in accordance with
CSA National Instrument 43-101 ("NI 43-101") standards, has been filed on SEDAR.
The results of the PEA suggest that the Huguenot Project has positive economics
and that it is worthy of continued exploration and development.
In summary, Norwest updated previously reported (2012) in situ and potentially
mineable resources, developed a conceptual mine plan to exploit the coal
resources through a combination of open pit and underground mining and prepared
scoping-level cost estimates and economic analyses for the Huguenot Project.
Highlights of the PEA report respecting the Huguenot Project are summarized as
follows (all costs are in US dollars):
-- The Huguenot Project has an indicative after-tax (and royalty) net
present value ("NPV") of US$1,100 million at a 7.5% discount rate (a
US$1,579 million NPV at a 5% discount rate) at a base-case coal price of
US$192.50 per tonne (which includes contingencies on capital costs
only).
-- The Huguenot Project has a total projected mine life of 31 years, with
the open pit (Years -1 - 14) and underground (Years 3 - 31) operating
simultaneously during Years 3 - 14.
-- Measured and indicated in-situ coal resources total 277.7 million tonnes
(132.0 million tonnes surface mineable plus 145.7 million tonnes
underground mineable) and represent an increase of 46.6% over previous
estimates for these two resource categories. Inferred resources total an
additional 119.2 million tonnes (0.5 million tonnes of surface mineable
plus 118.7 million tonnes underground mineable).
-- The Huguenot Project's potential coal production is identified as hard
coking coal similar to coking coal currently exported from northeast
British Columbia.
-- The base coal price used (US$192.50 per tonne) represents a discount of
US$7.50 per tonne from a projected long-term benchmark price of US$200
per tonne for premium medium volatile coking coal.
-- The PEA economic analysis is based on a conceptual open pit mine plan
targeting 56 million Run-of-Mine ("ROM") tonnes of resource at an
average stripping ratio of 8.6 :1 (bank cubic metres (bcm) :ROM tonnes)
plus a conceptual underground mine plan that targets an additional 66M
ROM tonnes of resource.
-- The Huguenot Project has total projected clean coal production of 89
million tonnes over a mine life of 31 years.
-- Projected clean coal production from combined surface and underground
mining operations ranges from 1.4 million tonnes per annum ("Mt/a") to
5.9 Mt/a, averaging approximately 3.0 Mt/a.
-- Projected clean coal production from the open pit averages approximately
3.2 Mt/a in Years 1 through 12 and 1.8 Mt/a from underground from Years
5 through 31.
-- The Huguenot Project's proposed payback of initial capital is estimated
at eight years after start-up.
-- The Huguenot Project's cash operating costs are estimated at US$77.84
per tonne clean coal (capital cost contingency only) at the mine
loadout. This figure increases to US$89.52 per tonne clean coal if an
operating cost contingency is also applied.
-- The Huguenot Project's average direct cost plus all offsite costs (ie,
FOB cost) is US$122.51 per clean tonne (with a contingency on capital
costs only) and US$134.19 per clean tonne (with contingencies on capital
and operating costs).
As part of the PEA, updated previous resource estimates reported by Norwest in a
prior NI 43-101 technical report issued in August 2012, to account for results
from the 2012 drilling program. The revised resource estimates are tabulated
below:
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Measured Indicated Inferred
Deposit type (Mt) (Mt) (Mt)
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Surface 96.20 35.75 0.53
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Underground 18.85 126.88 118.66
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TOTAL 115.05 162.63 119.19
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Conceptual mine plans developed in the study utilize surface mining for the
steeper dipping sections of the North, Middle and South resource blocks, while
the shallower dipping portions of the North Block below the economic limits of
the open pit were conceived as being mineable by underground longwall mining
techniques. Coal resources accounted for in both the open pit and underground
mine plans were estimated as:
---------------------------------------------
ROM Clean
Mining Method (Mt) (Mt)
---------------------------------------------
Open Pit 56 39
---------------------------------------------
Underground 66 50
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TOTAL 122 89
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It was assumed that the Huguenot Project would be connected by rail to the
existing rail line south of Tumbler Ridge, and that a third party would
construct this rail link, with costs being charged to the Huguenot Project on an
annual basis. It was further assumed that other potential projects along that
extended rail corridor would come on stream during the same general time frame
as the Huguenot Project and that the rail costs would be shared among several
users, such that the Huguenot Project's share of the annual costs would be no
more than 50% of the total.
The initial capital costs of the Huguenot Project have been significantly
reduced by assuming that major equipment items for surface mining would be
leased, and are therefore included as cash operating costs. Pre-production
capital cost for the proposed underground mine is estimated US$387 million
including a 15% contingency allowance, with additional sustaining capital of
US$186 million over the life of the mine.
A summary of the financial analyses is shown in the following table:
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Coal Price NPV (US$M) at Varying Discount Rates with IRR
----------------------------------------------------------------
w/ Capital Cost w/ Capital and Operating
Contingency Only Cost Contingencies
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IRR IRR
5% 7.5% 10% (%) 5% 7.5% 10% (%)
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US$225/t $2,634 $1,910 $1,420 49 $2,238 $1,602 $1,173 42
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US$192.50/t $1,579 $1,100 $ 780 32 $1,181 $790 $530 24
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US$165/t $680 $407 $230 16 $272 $ 85 - $32 9
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This 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 categorized as mineral reserves.
There is no certainty that the forecast results stated in the PEA will be
realized.
This press release has been reviewed by Warren Evenson of Norwest, a
Professional Geologist and a Qualified Person, as defined in NI 43-101.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that
term is defined in the policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release.
About Colonial Coal International Corp.
Colonial is a publicly traded pure-play coking coal company in British Columbia.
The northeast Coal Block of British Columbia, within which our Company's
projects are located, hosts a number of proven deposits and has been the subject
of M&A activities by Xstrata, Walter Energy, Anglo-American and others.
Additional information can be found on the Company's website www.ccoal.ca or by
viewing the Company's filings at www.sedar.com.
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FOR FURTHER INFORMATION PLEASE CONTACT:
Colonial Coal International Corp.
Perry Braun
604.568.4962
pbraun@ccoal.ca
Colonial Coal International Corp.
Shane Austin
604.568.4962
saustin@ccoal.ca
www.ccoal.ca