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Cline owns 100% of the New Elk Coal Mine in Trinidad,
Colorado. The New Elk mine has a measured and indicated
metallurgical coal resource of 388.5 million tons of
in-place coal, as documented in the Agapito Associates,
Inc. independent National Instrument 43-101 Technical
Report entitled “NI 43-101 Technical Report - New Elk
Mine Property, Las Animas County, Colorado, U.S.A.”
dated May 20, 2011 prepared by Leo Gilbride, P.E. and
Tim Ross, P.E. (the “2011 Technical Report”) The
resource estimate comes from an analysis of four coal
seams: Blue, Maxwell, Apache and Allen. These seams lie
parallel in sequence and are all included in the mine
plan. In addition to the coal resource, the coal mine
assets include a 3 million ton per year clean coal
preparation plant, product coal silos, buildings,
surface real estate, conveyor systems, electrics,
underground workings with mine portal access from the
plant site, mine permit and a permitted coal refuse
disposal site.
  
The
2011 Technical Report Preliminary Economic Projection
(PEA) shows a pre-tax Net Present Value (NPV) of US$1.4
billion at a 10% p.a. discount rate, a payback period of
1.7 years and an Internal Rate of Return (IRR) of 98%
p.a. calculated on the first 20 years of coal production
and sale in accordance with the PEA. These projections
compare with those in the 2010 Technical Report which
showed an NPV of US$1.0 billion at a 10% p.a. discount
rate, a payback period of 1.6 years and an IRR of 99%,
based on the same 20 year coal production and sale
scenario.
|
Total |
Measured |
Indicated |
Total Resource |
Inferred |
|
Blue Seam |
43.6 |
47.0 |
90.6 |
6.8 |
|
Maxwell Seam |
60.7 |
56.4 |
117.1 |
4.9 |
|
Apache Seam |
37.6 |
38.3 |
75.9 |
3.8 |
|
Allen Seam |
49.4 |
55.6 |
104.9 |
7.1 |
|
Total |
191.2 |
197.3 |
388.5 |
22.7 |
Note: Density Factor = 85lb/ft³
The New Elk Mine was opened in 1951 by the CF&I Steel
Company to provide metallurgical coking coal for its
blast furnace iron and steel production plant at Pueblo,
Colorado. The CF&I plant was converted to direct
electrolytic reduction of steel in 1981 eliminating its
need for coking coal and the mine was sold to Wyoming
Fuels who continued operation of the mine through 1989;
the coal preparation plant, which was built in 1984 to
improve product coal specification, continued operating
with coal from other nearby mines until 1996.
First production from the New Elk Coal Mine commenced in
December 2010 and will continue to ramp up to 2.75
million tons of saleable metallurgical coal produced in
2012 with 3 million tons of coal produced in 2013 and
thereafter. The quality of the coal in the seams is
described as low-sulphur, medium-to-high fluidity,
high-volatile B bituminous metallurgical coking coals.
The high grade specification that can be delivered on
“as received” basis is FSI 7.0-8.0; Ash 8.5%; Moisture
8.5%; Volatiles 35%; Fluidity 25,000 ddpm; Reflectance
0.90%; Sulfur 0.5%; Btu/lb. 13,500-14,000. Test
qualities are determined and reported by SGS. Seam
qualities are generally consistent and are not expected
to require mine site blending for the coking market.
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