PERTH (miningweekly.com) – Coal developer Paringa Resources has taken the decision to develop its Buck Creek No 2 mine first, as part of a staged multi-project development strategy to build a new midtier, high margin coal company.

The Buck Creek No 2 mine is located within the Buck Creek mining complex, in the Illinois basin of the US, and is just south of the proposed 3.8-million-tonne-a-year Buck Creek No 1 mine.

A scoping study into the No 2 mine found that for capital expenditure (capex) of $44-million, Paringa could deliver a 1.8-million-tonne-a-year operation with a mine life of 20 years.

“The results of the scoping study further illustrate that the Buck Creek mine complex is without doubt the best undeveloped coal project in the highly sought after Illinois basin,” said Paringa president and CEO David Gay.

“The scoping study has yielded extremely positive results, and if we knew from the outset what we know now, we would have always developed the No 2 mine first. The emergence of the No 2 mine has transformed the economics of the project, and we are very excited about the enhanced strategy of creating a staged multi-project development by building the low capex No 2 mine first, followed by the No 1 mine.”

The No 1 mine, in comparison, would require capex of $127-million to develop the 3.8-million-tonne-a-year operation, with the mine life estimated at 18 years.

Gay said that key reasons for taking the decision to develop the No 2 mine first included the lower capital costs attached to the project, which meant that the funding requirements to develop the mine would be significantly lower and would limit any dilution to shareholder value.

The No 2 mine would also offer shorter construction periods, with the mine expected to take some 12 months to construct, compared to the 19 to 22 months required for the No 1 mine.

Paringa would now expedite the remaining technical studies at the No 2 mine, and would continue debt financing discussions and contract additional coal sales throughout 2016.

The company was hoping to start construction of the No 2 mine by the second quarter of 2017, with first production targeted for mid-2018.