New BC coking coal mine on the cards
Publically traded Colonial Coal has announced the outcomes of a preliminary economic assessment (PEA) for a new coking coal mine, near Tumbler Ridge, in north-eastern British Columbia.
Although preliminary in nature, the PEA shows that the Gordon Creek project has positive economics and that it is worthy of continuing exploration and development, the TSX-V-listed company reported on Monday.
The study is based on a conceptual mine plan that targets 111.6-million tonnes of run-of-mine resource, with a yield of 57.4-million tonnes of coal over a mine life of 30 years. In full production, the mine will produce between 1.6-million tonnes a year to 2.6-million tonnes a year, averaging 1.9-million tonnes a year.
At a capital cost of $300-million for an underground mine, the Gordon Creek project will repay the initial capital investment in three years, Colonial stated.
The PEA delivered a net present value of $690.5-million, using a 7.5% discount rate, and an internal rate of return (IRR) of 24.4%, based on a weighted average coking coal price of $164.8/t and a premium pulverized coal injection coal price of $140.5/t.
Financial analysis suggests that the “break-even” coal price is less than $91.1/t, $96.5/t and $103.3/t for discount rates of 5%, 7.5% and 10%, respectively. It also indicates that for a 15% IRR, a minimum coal price of $119.9/t will be required.
The study calculated the overall weighted average price for all coal types at Gordon Creek to be $160.5/t.
The PEA assumed that the Gordon Creek project would be connected by road to the existing rail line south of Tumbler Ridge. The rail line would be accessed through a loadout located in the area of an existing coal loadout operated by Peace River Coal.
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