TIDMPDZ
RNS Number : 6167D
Prairie Mining Limited
28 April 2017
PRAIRIE MINING LIMITED
NEWS RELEASE | 28 April 2017
MARCH 2017 QUARTERLY REPORT
HIGHLIGHTS:
Debiensko Hard Coking Coal Project
-- Scoping Study illustrates potential for Debiensko to be a
globally significant hard coking coal project with robust economics
positioning the Company to become a large scale, low cost and long
life premium hard coking coal supplier
-- Drilling results indicate that Debiensko can produce a range
of premium hard coking coals comparable to internationally traded
benchmark coking coals
-- Maiden Coal Resource Estimate of 301 Mt hard coking coal
comprises 93 Mt Indicated and 208 Mt Inferred coal resources and is
based on seven seams with proven potential to produce high quality
hard coking coal
-- Infrastructure Study confirmed significant cost and timing
benefits of existing and immediately available infrastructure at
Debiensko with total estimated upgrade costs of only US$10
million
-- Independent Marketing Study confirmed large price and cost
advantages for Debiensko's premium hard coking coal with estimated
cost of delivery to major steel works in Central Europe of only
US$4.60 per tonne compared to costs of imported hard coking coal of
up to US$37.70 per tonne
-- Highly favourable market fundamentals as Europe continues to
consume 47 Mt of hard coking coal annually, 85% of which is
imported
-- Debiensko coking coal expected to enjoy strong demand from
European steelmakers, with substantial netback pricing advantages
given proximity to regional customers
-- Access to well established and already connected regional
rail infrastructure with underutilised bulk cargo capacity for low
transportation costs within Poland to regional Central European and
wider European customers
-- Leveraging off existing infrastructure at Debiensko results
in exceptionally low capital intensity of US$197 per tonne of
annual saleable production capacity compared to an industry average
of over US$401 per tonne
-- Significant positive social and economic benefits for regional development, jobs creation and re-industrialisation through re-development of a previously operating mine
Jan Karski Mine
-- China Coal and Prairie continue to advance towards completion
of a Bankable Feasibility Study in the second half of the year,
which will provide the basis for an EPC contract and a
construction-funding package for Jan Karski
-- The Strategic Co-operation Agreement with China Coal
demonstrates the increasing economic collaboration between Poland
and China following China's proposed "One Belt, One Road"
development strategy and highlights Poland's importance to China as
a "One Belt Economy" for accessing key European markets
-- China Coal is the second largest coal mining company in China
and one of the world's most advanced and prolific shaft sinking and
total underground coal mine construction companies
-- Permitting processes and land acquisition for the mining concession application continues
Corporate
-- Completed a successful placing of 11.5 million new ordinary
shares in the capital of the Company to a number of UK based high
quality institutional investors to raise approximately GBP3.2
million (A$5.5 million) before costs
-- Following the Placing, CD Capital agreed terms for an
additional A$2 million of non-redeemable, non-interest bearing
convertible loan notes thereby continuing its support to accelerate
the development of Prairie's Tier One premium coal projects
-- Following the successful placing of ordinary shares to UK
intuitional investors subsequent to quarter end, Prairie has cash
reserves of A$17 million. With CD Capital's additional A$2 million
investment still to come and their right to invest a further A$68
million as a cornerstone investor, plus with the Strategic
Co-operation Agreement Prairie has with China Coal for financing
and construction of Jan Karski, Prairie is in a strong financial
position to progress with its planned development activities at
Debiensko and Jan Karski
NEXT STEPS:
Debiensko Hard Coking Coal Project
-- Commence a focused in-fill drill program to increase JORC
measured and indicated resources to support future feasibility
studies for Debiensko
-- Deliver a re-engineered mine plan to produce a feasibility
study to international standards with a focus on near term
production at Debiensko
-- Commence discussion with regional steel makers and coke
makers for future coal sales and offtake
Jan Karski Mine
-- China Coal continuing with completion of the Bankable
Feasibility Study and ongoing discussions with a group of Chinese
financing institutions
-- Continue project permitting activities including, approval of
the Deposit Development Plan by the regional mining authority in
Lublin, obtaining an Environmental Consent Decision, Spatial
Planning consents (rezoning) and land acquisition at Jan Karski
-- Formally lodge a mining concession application for Jan Karski
For further information contact:
Ben Stoikovich
Chief Executive
Officer
+44 207 478 3900
Sapan Ghai
Corporate Development
+44 7557 055 166
info@pdz.com.au
Cautionary Statement
The primary purpose of the Scoping Study is to establish whether
or not to proceed to the next stage of feasibility studies and has
been prepared to an accuracy level of +/-30%. The Scoping Study
results should not be considered a profit forecast or production
forecast.
The Scoping Study is a preliminary technical and economic study
of the potential viability of Debiensko. In accordance with the ASX
listing rules, the Company advises that the Scoping Study referred
to in this announcement is based on lower-level technical and
preliminary economic assessments, and is insufficient to support
estimation of Ore Reserves or to provide assurance of an economic
development case at this stage, or to provide certainty that the
conclusions of the Scoping Study will be realised.
The Production Target referred to in this announcement is based
on 64% Indicated Resources and 36% Inferred Resources for the mine
life covered under the Scoping Study. In accordance with the 26
year mine plan incorporated into the Scoping Study, the first 14
years of production will come exclusively from Indicated Resources.
There is a low level of geological confidence associated with
Inferred Mineral Resources and there is no certainty that further
exploration work will result in the determination of Measured or
Indicated Mineral Resources or that the Production Target or
preliminary economic assessment will be realised.
The Scoping Study is based on the material assumptions outlined
elsewhere in this announcement. These include assumptions about the
availability of funding. While the Company considers all the
material assumptions to be based on reasonable grounds, there is no
certainty that they will prove to be correct or that the range of
outcomes indicated by the Scoping Study will be achieved.
To achieve the potential mine development outcomes indicated in
the Scoping Study, additional funding will be required. Investors
should note that there is no certainty that the Company will be
able to raise funding when needed however the Company has concluded
it has a reasonable basis for providing the forward looking
statements included in this announcement and believes that it has a
"reasonable basis" to expect it will be able to fund the
development of Debiensko. Given the uncertainties involved,
investors should not make any investment decisions based solely on
the results of the Scoping Study.
Debiensko HARD Coking Coal Project
The Debiensko Hard Coking Coal Project ("Debiensko") is a fully
permitted, hard coking coal project located in the Upper Silesian
Coal Basin in the south west of the Republic of Poland. It is
approximately 40 km from the city of Katowice and 40 km from the
Czech Republic.
Debiensko is bordered by the Knurow-Szczyglowice Mine in the
north west and the Budryk Mine in the north east, both owned and
operated by Jastrz bska Spó ka W glowa SA ("JSW"), Europe's leading
producer of hard coking coal.
The Debiensko mine was originally opened in 1898 and was
operated by various Polish mining companies until 2000 when mining
operations were terminated due to a major government led
restructuring of the coal sector caused by a downturn in global
coal prices. In early 2006 New World Resources Plc ("NWR") acquired
Debiensko and commenced planning for Debiensko to comply with
Polish mining standards, with the aim of accessing and mining hard
coking coal seams. In 2008, the Minister of Environment of Poland
("MoE") granted a 50-year mine license for Debiensko.
In October 2016 Prairie, acquired Debiensko with a view that a
revised development approach would potentially allow for the early
mining of profitable premium hard coking coal seams, whilst
minimising upfront capital costs. Prairie has proven expertise in
defining commercially robust projects and applying international
standards in Poland. The fact that Debiensko is a former operating
mine and its proximity to two neighbouring coking coal producers in
the same geological setting, reaffirms the significant potential to
successfully bring Debiensko back into operation.
Scoping Study Results
In March 2017, Prairie announced the results of a scoping study
("Study") in accordance with the JORC Code 2012 and completed by
independent consultants Royal HaskoningDHV given their extensive
and recent track record of successful involvement in European
underground coal projects in the UK, Kazakhstan and Poland,
including Prairie's Jan Karski Mine ("Jan Karski").
The Study utilised a maiden Coal Resource Estimate ("CRE") for
Debiensko which comprises a Global CRE of 301 million tonnes ("Mt")
including an Indicated Resource of 93 Mt from three coal seams;
401/1, 404/9 and 405 seams. Debiensko is located in the Upper
Silesian Coal Basin in the south west of the Republic of Poland.
Key results of the Study were as follows:
Table 1: Strong Project Estimations and
Approximations (to a maximum accuracy
variation +/- 30%)
------------------------------------------------------
Cash flow
---------------------------------- ------------------
Average Operating Costs US$47 per tonne
Steady State
---------------------------------- ------------------
Long Term Hard Coking ("HCC") US$142 per tonne
Price Benchmark (FOB Australia (current Mar
- REAL 2016$) 2017 spot price:
+US$160/t)
---------------------------------- ------------------
Average Received HCC Price US$157 per tonne
FOR (including netback)
---------------------------------- ------------------
Average Steady State EBITDA US$282 million
---------------------------------- ------------------
Production
---------------------------------- ------------------
Average ROM* Coal Production 4 Mtpa
Steady State
---------------------------------- ------------------
Life of Mine Plant Feed 100.3 Mt
Coal Production ("LOM")
---------------------------------- ------------------
Average Effective Product
Yield LOM 67.8 %
---------------------------------- ------------------
Mine Life Following First 26 years
Production
---------------------------------- ------------------
Average Saleable HCC Production 2.6 Mtpa
Steady State
---------------------------------- ------------------
Total Saleable HCC Produced 65 Mt
LOM
---------------------------------- ------------------
Total Saleable Coal Produced 68 Mt
LOM (HCC + Middlings)
---------------------------------- ------------------
Capital Expenditure to First
Production
---------------------------------- ------------------
Shaft sinking US$208.5 million
---------------------------------- ------------------
Coal processing and surface US$102.5 million
facilities
---------------------------------- ------------------
Underground Infrastructure US$62.0 million
(Belts, Ventilation, Electrics)
---------------------------------- ------------------
Capitalised Pre-Production US$51.5 million
Expenses (Labour, Power,
Contractors etc.)
---------------------------------- ------------------
Contingencies, EPCM and US$79.5 million
owners costs
---------------------------------- ------------------
Start of Construction 2019
---------------------------------- ------------------
Start of Production Ramp-Up 2023
---------------------------------- ------------------
*Run of Mine
** FX rate assumed for the Study is PLN:USD - 4.0:1.0
The results of the Study demonstrate the potential for
exceptionally high operating margins and cash flow generation given
the anticipated low operating costs for Debiensko. This is achieved
because Prairie is pioneering in Poland well established
international best practice in mine design, production organisation
and technology for the project. Debiensko benefits from being a
formerly operating mine, giving an excellent understanding of
geology and mining conditions with substantial existing
infrastructure available at site.
Based on an independent marketing study conducted by CRU
International ("CRU"), a long term hard coking coal benchmark price
forecast of US$142/t (FOB Australia, real 2016 $) has been used in
this Study. This compares to the current (March 2017) spot price of
over US$160/t and the 2017 Q1 quarterly contract price of US$285/t.
Due to the considerable transport cost advantages compared to
imported hard coking coal, the CRU study also identified that
Debiensko would potentially benefit from a substantial netback
premium of US$15/t above benchmark prices for coal sold to regional
Central European customers.
Potentially Lowest Global Cash Operating Costs Delivered Into
Europe
Debiensko is projected to have an average steady state total
cash cost of approximately US$47 per tonne Free On Rail ("FOR") for
its premium hard coking coal, producing an average 2.6 Mtpa. Hard
coking coal product from Debiensko is anticipated to be at the
bottom of the global cost curve for hard coking coal delivered into
Central Europe, with a delivered cost of approximately US$51 per
tonne (FOR total cash cost including royalty + rail to typical
regional customer).
Low Capital Intensity
Debiensko is projected to have extremely low capital intensity
compared to other globally significant hard coking coal mines that
have been brought into production over the last decade. Debienkso
has a capital intensity of approximately US$197/t annual saleable
hard coking coal, compared to a peer group average of US$401/t.
Debienkso benefits from existing utilities and infrastructure on
site, given it is a brownfield project located in an area of heavy
industry. The project also enjoys access to well established
regional rail logistics with underutilised freight capacity,
providing an immediate route to regional customers. Hard coking
coal is a scarce commodity that is typically found in more complex
geological settings, which means that the capital costs to develop
genuine hard coking coal mines are generally higher than for mines
that produce lower rank coals.
Netback Pricing Advantage & Marketing Strategy
CRU completed a review of the European coking coal market on
behalf of Prairie. The CRU study, together with various independent
and internal studies regarding coal quality and railway transport
indicates that premium hard coking coal produced at Debiensko will
attract strong regional demand and will benefit from a
significantly lower estimated cost of delivery to Central European
customers compared to coking coal imported from the international
seaborne market. Accordingly, hard coking coal sales from Debiensko
will likely secure a substantial "netback" price advantage.
The CRU study included a comparison of the cost of importing
hard coking coal from Australia, USA and Russia delivered into
Polish steelworks. CRU used ArcelorMittal's Zdzieszowice coke
plant, the largest coke plant in Central Europe, as representative
benchmark to estimate delivery costs.
Coal imported for delivery to Zdzieszowice from the
international seaborne market is purchased at the prevailing FOB
price at the country of origin. Transportation costs incurred to
deliver coal to the port of Swinoujscie, Poland include sea
freight, port handling, storage and forwarding costs. Subsequently,
the coal needs to be transported approximately 600 km by rail to
the Zdzieszowice coke plant which incurs further freight charges.
The coal requires up to 60 days to reach the coke plant from
Australia and approximately 30 days from the USA. It is also
handled multiple times, with greater potential for increased
degradation and fines generation.
In comparison, Debiensko is only 70 km from the Zdzieszowice
coke plant and directly linked by rail. Transportation costs for
Debiensko's coal to Zdzieszowice are estimated to be less than
US$4.60/t.
Due to their proximity to Central European coking plants,
regional producers such as NWR or JSW have traditionally gained a
"netback premium" over FOB Australia or USA benchmark prices, which
once adjusted for coal quality differences, equates to
approximately 50% of the total transport cost differential.
Essentially, an analysis of past practises shows that the coal
producer and steel maker "split the difference". Following this
approach for Debiensko would result in a potential netback premium
of US$15/t above prevailing benchmark prices for Debiensko coal
when sold to regional end users compared to imported hard coking
coal. However, Prairie believes there is significant potential to
increase this netback premium during future discussions with
offtakers.
Table 2: Total Freight to Zdzieszowice (Source: CRU)
------------------------------------------------------------------------------------------------------------------------------------------
Port of Sea freight Estimated Typical Typical Estimated Port Total Estimated Rail Total Freight
Origin distance to Shipping Vessel Vessel Sea Freight Handling, Sea Rail Freight Handling Costs
Swinoujscie Time Type Size Cost to Storage Freight Cost (US$/t & (US$/t 2017)
(dwt) Swinoujscie and Cost 2017) Parking
(US$/t 2017) Forwarding (US$/t) Fees
Fees (US$/t)
(US$/t)
------------ ------------ ---------- -------- -------- ------------- ----------- -------- ------------- --------- --------------
Debiensko n/a n/a n/a n/a n/a n/a n/a 3.00 1.60 4.60
------------ ------------ ---------- -------- -------- ------------- ----------- -------- ------------- --------- --------------
Hampton
Roads 3,958 16 days Panamax 70,000 11.50 6.00 17.50 11.90 1.60 31.00
============ ============ ========== ======== ======== ============= =========== ======== ============= ========= ==============
Murmansk 1,656 7 days Panamax 70,000 6.70 6.00 12.70 11.90 1.60 26.20
============ ============ ========== ======== ======== ============= =========== ======== ============= ========= ==============
Mobile 5,173 21 days Panamax 70,000 14.00 6.00 20.00 11.90 1.60 33.50
============ ============ ========== ======== ======== ============= =========== ======== ============= ========= ==============
Queensland 11.858 49 days Panamax 70,000 18.20 6.00 24.20 11.90 1.60 37.70
------------ ------------ ---------- -------- -------- ------------- ----------- -------- ------------- --------- --------------
Maiden JORC Coal Resource Estimate
The maiden CRE, confirms that the coal seams within Debiensko
form an extensive, moderately dipping, and laterally consistent set
of coal seams containing high quality hard coking coal.
The CRE, comprises 93 Mt in the Indicated Category as part of a
total CRE of 301 Mt. The CRE is based on seven of the thickest and
most consistent hard coking coal seams within the Debiensko licence
area.
Table 3: Debiensko Hard Coking Coal Resource (air dried basis)
---------------------------------------------------------------------
Seam Indicated (Mt) Inferred (Mt) Total Coal Resource
In-Situ (Mt)
------- ------------------ ---------------- ----------------------
401/1 20 22 42
======= ================== ================ ======================
402/1 - 53 53
======= ================== ================ ======================
403/1 - 34 34
======= ================== ================ ======================
403/2 - 39 39
======= ================== ================ ======================
404/1 - 30 30
======= ================== ================ ======================
404/9 35 20 55
======= ================== ================ ======================
405 38 10 48
------- ------------------ ---------------- ----------------------
Total 93 208 301
------- ------------------ ---------------- ----------------------
* Rounding errors may occur
** The Indicated and Inferred Resource tonnage calculations are
reported with geological uncertainty of +/-10% and +/-15%
respectively
Debiensko has attractive coal quality parameters, within all
seams, with the proven potential to produce high quality hard
coking coal. The resource estimate does not present washed coal
quality results but instead presents only raw unwashed coal
parameters.
Premium Quality Hard Coking Coal
Preliminary analysis indicates that a range of premium hard
coking coals that will be in high demand from European steelmakers
can be produced from Debiensko. This analysis is based on
historical data, neigbouring operational coking coal mines and the
results of a suite of modern coking tests performed on selected
seams from a fully cored borehole drilled by the previous owners in
2015/16. Two premium hard coking coal specifications have been
delineated from select seams at Debiensko, namely Medium volatile
matter hard coking coal ("Mid-vol HCC") and Low volatile matter
hard coking coal ("Low-vol HCC"). Future study phases will
determine the precise Debiensko premium hard coking coal quality
specification on a year by year basis depending on final adopted
mine plan, mining schedule and extent of coal blending.
Both Debiensko's Mid-vol and Low-vol HCC lie within the range of
premium hard coking coals produced globally. Indications are that
the Mid-vol HCC at Debiensko is present between 850 m to 1,000 m
from surface and the Low-vol HCC is present 1,000 m to 1,300 m
below surface i.e. at depths similar to adjacent operating mines
owned by JSW - the largest coking coal producer in Europe.
Medium Volatile Matter Hard Coking Coal
The quality of Mid-vol HCC from Debienkso compares favourably
with the Australian Goonyella hard coking coal brand, and with
medium volatile coals produced in Poland today by JSW. This coal
features good rheological properties and coke yield, with low
sulphur levels. Prairie's assessment is that Mid-vol HCC from the
Debiensko project may receive premium pricing in European and
international markets.
Table 4: Debiensko Medium Volatile Matter Hard Coking
Coal Comparison to International Benchmarks
-------------------------------------------------------------------------------------------------------------------
Quality Debiensko* Goonyella Oaky Elkview Tuhup Pittston Borynia-JSW Pniowek-JSW
(Poland) (Australia) Creek (Canada) (Indonesia) (USA) (Poland) (Poland)
(Australia)
-------------- ---------- ------------ ------------ --------- ------------ -------- ----------- -----------
Ash (%) 3.2 8.9 9.5 9.5 7.0 8.0 8.5 8.5
-------------- ---------- ------------ ------------ --------- ------------ -------- ----------- -----------
Volatile
Matter
(%) 25.0 23.8 24.5 23.5 26.5 26.0 24.8 27.0
-------------- ---------- ------------ ------------ --------- ------------ -------- ----------- -----------
Sulphur
(%) 0.56 0.56 0.60 0.50 0.70 0.85 0.65 0.60
-------------- ---------- ------------ ------------ --------- ------------ -------- ----------- -----------
Phosphorous
(P) in
Coal (%) 0.025 0.025 0.070 0.07 0.02 0.019 0.059 0.050
-------------- ---------- ------------ ------------ --------- ------------ -------- ----------- -----------
Free Swelling
Index (FSI) 8 1/2 8 8 1/2 7 1/2 9 8 7 1/2 8 1/2
-------------- ---------- ------------ ------------ --------- ------------ -------- ----------- -----------
CSR (%) 63 66 67 70 60 - - -
-------------- ---------- ------------ ------------ --------- ------------ -------- ----------- -----------
Fluidity up to up to
(ddpm) 1200 1100 5000 150 450 - 2,300 3,000
-------------- ---------- ------------ ------------ --------- ------------ -------- ----------- -----------
C daf (%) 86 88.4 86.8 81.2 - 88.0 - -
-------------- ---------- ------------ ------------ --------- ------------ -------- ----------- -----------
Rv Max 1.23 1.17 1.10 1.22 1.18 1.10 1.20 1.10
-------------- ---------- ------------ ------------ --------- ------------ -------- ----------- -----------
Vitrinite
(%) 78 58 75 55 96 76 - -
-------------- ---------- ------------ ------------ --------- ------------ -------- ----------- -----------
* Indicative quality Debiensko Mid-vol HCC from washed sample
from 401/1 seam at floats <1.40kg/m3
Low Volatile Matter Hard Coking Coal
Debiensko's Low-vol HCC is similar to other internationally
traded low volatile matter hard coking coals, including brands such
as Peak Downs (BHP Billiton Mitsubishi Alliance - BMA) and Hail
Creek (Rio Tinto) produced in Australia. Whilst the Coke Strength
after Reaction ("CSR") is anticipated to be slightly lower than
these Australian coals, the quality of Debiensko Low-vol HCC is
anticipated to be in-line with coal produced at JSW's Jas-Mos mine
in Poland, which is used as a stabilizing and leaning component of
nearly every coal blend for production of blast furnace coke in the
region.
Table 5: Debiensko Low Volatile Matter Hard Coking
Coal Comparison to International Benchmarks
-------------------------------------------------------------------------------------------------------------
Quality Debiensko* Peak German Hail Blue Buchanan Neryungri Jas-Mos
(Poland) Downs Creek Creek Creek (USA) (Russia) (Poland)
(Australia) (Australia) (Australia) - No.7
(USA)
-------------- ---------- ------------ ------------ ------------ ------- -------- --------- ---------
Ash (%) 9.5 10.0 9.5 8.9 9.0 5.3 10.0 7.8
-------------- ---------- ------------ ------------ ------------ ------- -------- --------- ---------
Volatile
Matter
(%) 20.5 20.5 19.0 20.5 19.9 18.7 19.3 21.4
-------------- ---------- ------------ ------------ ------------ ------- -------- --------- ---------
Sulphur
(%) 0.30 0.60 0.54 0.4 0.71 0.73 0.21 0.56
-------------- ---------- ------------ ------------ ------------ ------- -------- --------- ---------
Free Swelling
Index 7 1/2 8 1/2 8 1/2 7 8 1/2 8 1/2 8 7 1/2
-------------- ---------- ------------ ------------ ------------ ------- -------- --------- ---------
Fluidity
(ddpm) 128 275 400 300 1113 100 18 200
-------------- ---------- ------------ ------------ ------------ ------- -------- --------- ---------
C daf (%) 80 89.1 88.6 88.2 91 - 80.8 -
-------------- ---------- ------------ ------------ ------------ ------- -------- --------- ---------
Rv Max 1.5 1.40 1.45 1.26 1.48 1.63 1.50 1.40
-------------- ---------- ------------ ------------ ------------ ------- -------- --------- ---------
Vitrinite
(%) 59 68 73 54 70 76 81 -
-------------- ---------- ------------ ------------ ------------ ------- -------- --------- ---------
*Indicative quality Debiensko Low-vol HCC from unwashed sample
from 404/9 seam
JAN KARSKI MINE
China Coal Strategic Co-operation Agreement and Definitive
Feasibility Study
During the quarter, China Coal and Prairie continued to advance
towards completion of a Bankable Feasibility Study in the second
half of the year, which will provide the basis for an Engineering,
Procurement, Construction ("EPC") contract and a
construction-funding package for Jan Karski.
In November 2016, Prairie and China Coal, the second largest
coal mining company in China and one of the world's most advanced
and prolific shaft sinking and total underground coal mine
construction companies, signed a landmark Strategic Co-operation
Agreement to advance the financing and construction of Prairie's
Jan Karski Mine in Poland.
Prairie and China Coal No.5 Construction Company Ltd ("CC5C")
have been in discussions since 2014 regarding the potential for
collaboration in designing and constructing Jan Karski.
Since 2014, Prairie's senior management and technical team have
met with CC5C numerous times in China and inspected CC5C's various
shaft sinking projects, mine construction sites and state of the
art longwall coal mines operated by China Coal.
The Strategic Co-operation Agreement was signed confirming the
intention of the parties to, on a best efforts basis:
(i) complete a Bankable Feasibility Study by mid-2017, which
will form the basis of Chinese bank credit approval for project
finance;
(ii) based on the results of the Bankable Feasibility Study,
enter into a complete EPC contract under which CC5C will construct
the Jan Karski Mine; and
(iii) incorporate relevant Polish content into the design and
construction phases, which will include working with a range of
Polish specialists, sub-contractors and business partners.
It is the intention of the parties to enter into future binding
agreements for CC5C to construct Jan Karski once the Bankable
Feasibility Study is completed successfully and indicative
financing terms are given by financing institutions.
China Coal International Strategy and "One Belt, One Road"
Initiative
CC5C has been internationally active since 1988. Through CC5C,
China Coal expedited the implementation of its strategy to become
an internationally competitive project contractor. Globally, China
Coal has undertaken and continues to develop several projects
across Morocco, Bangladesh, Turkey, Vietnam, India, and Ecuador for
clients and partners including:
-- Vedanta Resources plc - a London-listed, global diversified natural resources group; and
-- JSW Group - a leading Indian conglomerate part of the O.P. Jindal Group.
In 2013, Chinese President Xi Jinping proposed the "One Belt,
One Road" development strategy and framework which calls for
greater economic cohesion between China and 60 countries throughout
Europe, Asia and Africa through building infrastructure, increasing
cultural exchanges, and broadening trade.
Poland is considered a key "One Belt Economy" important to
Chinese economic access to Europe, most recently demonstrated by
meetings between the Chinese and Polish Leaders in June 2016
including signing of cooperative treaties, the opening of a
China-Poland trade forum and welcoming of freight trains linking
Chengdu and ód , carrying goods between the capital of Sichuan
Province and Poland's third-largest city.
Prairie's and CC5C's Strategic Co-operation Agreement
demonstrates the increasing economic collaboration between Poland
and China.
Mining Concession Application & Project Permitting
Prairie is currently working towards completing a mining
concession application which, in Poland, comprises the submission
of a Deposit Development Plan ("DDP"), an Environmental Social
Impact Assessment ("ESIA") that is to be approved by regional
authorities and approval of a spatial development plan (rezoning of
land for mining use). The DDP is a Polish standard mine
technical-economic study as prescribed in the Polish mining
regulations. Under Polish law, the environmental consent decision
must be obtained prior to granting of the mining concession. The
environmental consent decision is issued by a specialised
environmental authority (the Regional Director for Environmental
Protection).
The Company is currently progressing with the mining concession
application process and intends to formally lodge a mining
concession application for Jan Karski in the next 12 months.
PRAIRIE DOWNS BASE METALS PROJECT
During the quarter, Prairie completed the sale of the Prairie
Downs Base Metals Project ("BMP") to Marindi Metals Limited.
Prairie now retains a 2.5% net smelter royalty over the BMP.
CORPORATE
Placing to UK Based Institutional Investors
On 30 March 2017, Prairie announced that it had placed 11.5
million new ordinary shares in the capital of the Company at a
price of 28 pence per share (A$0.46 per share), to raise
approximately GBP3.2 million before expenses ("Placing").
The net proceeds from the Placing, which is in response to
demand for the Company's shares from UK based institutional
investors, will be used for the further development of the
Company's Polish coal development projects. In particular, the
Placing will enable Prairie to accelerate the development of
Debiensko, including additional drilling in support of future
feasibility study work. In parallel, Prairie is also on track to
complete a Bankable Feasibility Study in the second half of 2017
for Jan Karski, for which the proceeds of the Placing will be
partly applied to advance pre-construction engineering works such
as the provision of high voltage power supply to the mine site
area, and the permitting processes.
Additional Investment by CD Capital
On 17 April 2017, Prairie announced that it has agreed terms for
further investment from its cornerstone investor CD Capital Natural
Resources Fund III LP ("CD Capital") subject to shareholder
approval and completion of final formal documentation. The
investment will take the form of a private placement by PDZ
Holdings Pty Ltd ("PDZ Holdings") (a wholly-owned subsidiary of
Prairie which indirectly holds Jan Karski and Debiensko) of
non-redeemable, non-interest bearing convertible loan notes
("Notes") for an aggregate principal amount of A$2 million. The
Notes can be exchanged into ordinary shares of the Company at
A$0.46 per share representing the price of the Placing announced in
March 2017. This follows a similar structure to CD Capital's
existing convertible loan notes, issued in 2015.
Appointment of Chief Financial Officer
Subsequent to the end of the quarter, Mr Simon Kersey was
appointed as CFO of the Company. Mr Kersey joins the Company with
many years of experience in the mining industry.
Mr Kersey is a chartered accountant with over 15 years'
experience providing financial and advisory services to the mining
industry covering debt, equity and offtake financings for mine
developments as well as a variety of other corporate transactions.
Before joining Prairie, Mr Kersey was a Managing Director within
the investment banking sector in London and has held roles at a
number of investment banks and advisory firms including BMO Capital
Markets, Deutsche Bank and PwC.
Financial Position
Following the successful placing of ordinary shares to UK
intuitional investors subsequent to quarter end, Prairie has cash
reserves of A$17 million. With CD Capital's additional A$2 million
investment still to come and their right to invest a further A$68
million as a cornerstone investor, plus with the Strategic
Co-operation Agreement Prairie has with China Coal for financing
and construction of Jan Karski, Prairie is in a strong financial
position to progress with its planned development activities at
Debiensko and Jan Karski.
EXPLORATION TENEMENT INFORMATION
As at 31 March 2017, the Company has an interest in the
following tenements:
Location Tenement Percentage Interest Status Tenement Type
------------------- ------------------------------- -------------------- -------- --------------------------------
Jan Karski, Poland Jan Karski Mine Plan Area 100 Granted Exclusive Right to apply for a
(K-4-5, K-6-7, K-8 and K-9)* mining concession
Jan Karski, Poland Kulik (K-4-5) 100 Granted Exploration
Jan Karski, Poland Syczyn (K-8) 100 Granted Exploration
Jan Karski, Poland Kopina (K-9) 100 Granted Exploration
Jan Karski, Poland Sawin-Zachód 100 Granted Exploration
Debiensko, Poland Debiensko 1 100 Granted Mining
Debiensko, Poland Kaczyce 1 100 Granted Mining & Exploration (includes
gas rights)
------------------- ------------------------------- -------------------- -------- --------------------------------
* On 1 July 2015, the Company announced that it had secured the
Exclusive Right to apply for, and consequently be granted, a mining
concession for Jan Karski.
As a result of its geological documentation for Jan Karski
deposit being approved, Prairie is now the only entity that can
lodge a mining concession application over Jan Karski within a
three (3) year period.
The approved geological documentation covers an area comprising
of all four of the original exploration concessions granted to
Prairie (K-4-5, K-6-7, K-8 and K-9) and includes the full extent of
the targeted resources within the mine plan for Jan Karski. In this
regard, no beneficial title interest has been surrendered by the
Company when the K-6-7 exploration concession expired during the
quarter. The Company intends to submit a mining concession
application, over the mine plan area at Jan Karski (which includes
K-6-7) within the next 12 months. Under Polish mining law, and
owing to the Exclusive Right the Company has secured, Prairie is
the only entity that may apply for and be granted a mining
concession with respect to the K-6-7 area (the Exclusive Right also
applies to the K-4-5, K-8 and K-9 areas of Jan Karski). There is no
requirement for the Company to hold an exploration concession in
order exercise the Exclusive Right and apply for a mining
concession.
Appendix 1: Coal Quality Parameters at Debiensko*
---------------------------------------------------------------------------------------------
Seam Parameters Indicated Inferred
------ ----------- ----------------------------------- -----------------------------------
Range Weighted Average Range Weighted Average
------ ----------- ---------------- ----------------- ---------------- -----------------
From To From To
------ ----------- ------- ------- ----------------- ------- ------- -----------------
401/1 Moisture% 0.33 1.24 0.68 0.45 1.25 0.60
------
Ash% 3.15 24.24 9.24 5.89 24.03 7.47
------
VM% 24.69 31.51 27.75 20.86 31.92 25.42
Sulphur% 0.37 1.60 0.74 0.48 1.58 0.63
GCV 26,478 34,082 31,416 26,543 33,584 32,881
------ ----------- ------- ------- ----------------- ------- ------- -----------------
402/1 Moisture% - - - 0.10 1.02 0.62
------
Ash% - - - 3.47 29.68 11.49
------
VM% - - - 19.36 31.61 25.28
Sulphur% - - - 0.27 2.18 0.72
GCV - - - 23,547 33,797 30,538
------ ----------- ------- ------- ----------------- ------- ------- -----------------
403/1 Moisture% - - - 0.35 1.02 0.66
------
Ash% - - - 3.73 23.74 11.52
------
VM% - - - 16.73 32.13 25.83
Sulphur% - - - 0.29 0.75 0.49
GCV - - - 27,511 32,627 31,017
------ ----------- ------- ------- ----------------- ------- ------- -----------------
403/2 Moisture% - - - 0.35 1.12 0.73
------
Ash% - - - 3.25 33.36 11.38
------
VM% - - - 23.64 31.28 26.75
Sulphur% - - - 0.40 1.87 0.67
GCV - - - 22,328 33,760 30,581
------ ----------- ------- ------- ----------------- ------- ------- -----------------
404/1 Moisture% - - - 0.25 1.10 0.65
------
Ash% - - - 6.50 27.38 12.89
------
VM% - - - 17.81 31.58 25.04
Sulphur% - - - 0.35 0.81 0.54
GCV - - - 25,432 33,025 30,012
------ ----------- ------- ------- ----------------- ------- ------- -----------------
404/9 Moisture% 0.56 0.76 0.68 0.53 0.86 0.69
------
Ash% 9.45 19.54 11.75 9.65 19.89 13.80
------
VM% 20.97 32.95 26.80 15.57 31.05 23.20
Sulphur% 0.20 1.14 0.60 0.20 1.14 0.41
GCV 29,145 32,516 31,269 29,067 32,748 30,604
------ ----------- ------- ------- ----------------- ------- ------- -----------------
405 Moisture% 0.35 1.09 0.65 0.48 0.87 0.65
------
Ash% 5.63 17.40 9.61 5.42 12.47 9.17
------
VM% 19.40 28.33 23.52 15.33 28.70 22.47
Sulphur% 0.29 0.48 0.35 0.27 0.93 0.37
GCV 29,760 34,137 32,198 31,538 34,113 32,427
------ ----------- ------- ------- ----------------- ------- ------- -----------------
*All analyses are given on an air dried basis except for
volatile matter which is on a dry ash free basis.
Competent Person Statements
The information in this announcement that relates to Mining,
Coal Preparation, Infrastructure, Production Targets and Cost
Estimation was extracted from Prairies announcement dated 16 March
2017 entitled "Scoping Study Indicates Debiensko Mine Restart Will
Deliver Lowest Cost Hard Coking Coal Into Europe". The information
in this presentation that relates to Exploration Results and Coal
Resources was extracted from Prairies announcement dated 1 February
2017 entitled "Maiden 301Million Tonnes Hard Coking Coal Resource
Confirmed at Debiensko". Both announcements referred to above are
available to view on the Company's website atwww.pdz.com.au.
The information in the original announcement that relates to
Mining, Coal Preparation, Infrastructure, Production Targets and
Cost Estimation is based on, and fairly represents, information
compiled or reviewed by Mr Maarten Velzeboer, a Competent Person,
Member of the Institute of Materials, Minerals and Mining (MIMMM).
MrVelzeboer has worked in deep coal mines in New South Wales and
Queensland in Australia and the Karaganda Coalfield in Kazakhstan.
Mr Velzeboer has been engaged in a senior capacity in the design
and development of proposed mines in Queensland, Australia,
Botswana and Venezuela. Mr Velzeboer is employed by independent
consultants Royal HaskoningDHV. Mr Velzeboer has sufficient
experience that is relevant to the style of mineralisation and type
of deposit under consideration andto the activity being undertaken
to qualify as a Competent Person as defined in the 2012 Edition of
the Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves.
The information in the original announcement that relates to
Exploration Results and Coal Resources is based on, and fairly
represents information compiled or reviewed by Mr Jonathan O'Dell,
a Competent Person who is a Member of The Australasian Institute of
Mining and Metallurgy who is a consultant of the Company. Mr O'Dell
has sufficient experience that is relevant to the style of
mineralisation and type of deposit under consideration and to the
activity which he is undertaking to qualify as a Competent Person
as defined in the 2012 Edition of the Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore
Reserves.
Prairie confirms that: a) it is not aware of any new information
or data that materially affects the information included in the
original announcements and; b) all material assumptions and
technical parameters underpinning the Production Target, Coal
Resource and related forecast financial information derived from
the Production Target included in the original announcements
continue to apply and have not materially changed; c) the form and
context in which the relevant Competent Persons findings are
presented in this announcement has not been materially modified
from the original announcements.
Forward Looking Statements
This release may include forward-looking statements. These
forward-looking statements are based on Prairie's expectations and
beliefs concerning future events. Forward looking statements are
necessarily subject to risks, uncertainties and other factors, many
of which are outside the control of Prairie, which could cause
actual results to differ materially from such statements. Prairie
makes no undertaking to subsequently update or revise the
forward-looking statements made in this release, to reflect the
circumstances or events after the date of that release.
To view the announcement in full including all figures and
illustrations please refer to the Company's website at
www.pdz.dom.au.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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