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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 618.9 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 July 6, 2012 prepared by Leo Gilbride, P.E. and
Tim Ross, P.E. (the "2012 Technical Report"). These
resource increases are attributed to the agreement the
Company entered into with the Department of Wildlife of
the State of Colorado (“DOW”), which extended its
present DOW coal mining property lease area at New Elk
from 15,553 acres to 29,940 acres, a 92% percent
increase in acreage. The 14,387 acre extended DOW lease
also includes the recently acquired Secora Ranch, and
four new coal seams connected to the initial New Elk
property (see Cline’s May 24, 2012
press release).
  
| Seam |
Measured (Tons) |
Indicated (Tons) |
M & I (Tons) |
Inferred (Tons) |
| Green |
31.9 |
27.5 |
59.4 |
0.1 |
| Loco |
14.4 |
30.0 |
44.3 |
26.6 |
| Blue |
52.2 |
38.1 |
90.3 |
0.9 |
| BCU |
12.8 |
36.8 |
49.6 |
30.0 |
| Red |
23.3 |
10.3 |
33.6 |
0.0 |
| Maxwell |
72.1 |
71.7 |
143.8 |
17.4 |
| Apache |
50.3 |
56.8 |
107.1 |
15.4 |
| Allen |
42.8 |
47.9 |
90.7 |
14.1 |
| TOTALS |
299.8 |
319.1 |
618.9 |
104.5 |
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.
On July 3, 2012 the Company announced that it is currently revising and
optimizing the operations of the New Elk Coal Company LLC (“New Elk”) under the
leadership of New Elk’s recently-appointed Chief Operating Officer, David Stone.
Taking into account the inclusion of the additional tons of Measured and
Indicated (“M&I”) coal resources identified through the updating of the
Company’s resource by Agapito Associates, Inc., a detailed optimization process
has been commenced to ensure that the optimum Net Present Value is achieved for
the asset. It is envisaged that this review process should take approximately 10
to 12 weeks and will include short-term volume optimization for a defined ‘Life
of Mine’ value maximization.
A forecast will also be developed during this period for the remainder of the
2012 year and a budget for the 2013 year. These actions will enable the
provision of appropriate volume and cost guidance as the operation tracks from
the completion of the opening project through to Phase 1 of the production
cycle.
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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