Name and Location
Buck Creek No 2 coal project, Illinois, US.

Client
Paringa Resources.

Project Description
When Paringa originally acquired the coal leases comprising the Buck Creek mining complex in 2013, the only historical work that had been conducted on the property was on No 1 Mine and, as a result, the mine was the company’s initial focus.

Paringa has since acquired additional coal leases, undertaken expanded drilling programmes and prepared a geological model for the entire Buck Creek mining complex.

This has led to the discovery of a section of coal to the south of the No 1 Mine area, with a shallow depth from surface that could be suitable for a simple, low-cost boxcut mine development to access the coal seam.

The discovery has prompted Paringa to undertake technical studies on a shallow section of coal, now called No 2 Mine. Based on the exceptional results of these studies, Paringa will now develop the low capital expenditure (capex) No 2 Mine first, followed by the shovel-ready No 1 Mine, as part of a staged development strategy for building a new midtier, high-margin Illinois basin coal company.

Using the Buck Creek mine complex’s coal resource estimate of 224.8-million tons of coal, the project can support production of 2.3-million tonnes a year of run-of-mine coal yielding an estimated 1.8-million tonnes a year of saleable clean coal at steady-state production over a 20-year mine life.

Proposed production from the mine will come exclusively from room-and-pillar mining methods.

The Buck Creek mine complex will ultimately become a strategic 5.6-million-tonne-a-year supplier of high-quality coal into the growing eastern US power market.

Net Present Value/Internal Rate of Return
Not stated.

Value
The project has an initial cost of $44.4-million.

Duration
Construction at No 2 Mine is expected to get under way in the second quarter of 2017, with production expected to begin mid-2018, before it reaches full production in 2019.

Latest Developments
Paringa has successfully amended its coal sales contract with Louisville Gas & Electric (LG&E) and Kentucky Utilities (KU), following its recent change in strategy to develop Buck Creek No 2 Mine ahead of the Buck Creek No 1 Mine’s proposed 2.8-million-ton-a-year coal project.

Paringa decided in February to develop No 2 Mine first, as scoping studies revealed that it would transform the economics of the Buck Creek mine complex.

The amended cornerstone coal sales agreement with LG&E and KU, which have agreed to the same terms as the original contract, now reflects delivery of coal from No 2 Mine, though volumes and coal specifications remain unchanged. The project development milestones and delivery schedule for No 2 Mine, however, have been updated.

Fixed sale prices have also changed slightly to reflect recent sales data, resulting in a fall of 7% in the nominal total value of the coal sales contract from $220-million to $205-million.

The amended contracted fixed coal prices for Paringa’s 11 200 British thermal unit coal specifications begin at $40.50/t for the first 750 000 t of coal delivered to LG&E and KU, escalating to $45.75/t for the final million tons sold.

Sixty per cent of No 2 Mine’s yearly production during the five-year sales agreement will be contracted to LG&E and KU, significantly derisking the project for potential financiers.

Meanwhile, Paringa has reported that the company is “progressing rapidly” with No 2 Mine’s bankable feasibility study and has identified a significant reduction in Paringa’s operating and capital costs.

Key Contracts and Suppliers
None stated.

On Budget and on Time?
Not stated.

Contact Details for Project Information
Paringa Resources, tel +61 8 9322 6322, fax +61 8 9322 6558 or email info@paringaresources.com.