PERTH (miningweekly.com) – A prefeasibility study (PFS) into the Buck Creek No 1 mine, in the US, has estimated that the project could deliver 5.2-million tonnes a year of run-of-mine product, at steady-state production.

Owner Paringa Resources on Tuesday revealed that the project would require an initial capital investment of $127-million to yield 3.8-million tonnes a year of saleable coal, over a mine life of around 18 years.

The PFS was based on an ore reserve estimate of 62.6-million tonnes.

A 2014 scoping study indicated that the Buck Creek No 1 mine could deliver 3.4-million tonnes a year of saleable coal, over a mine life of 16 years, and would require a capital investment of $76-million, along with a coal handling and process plant and barge load-out facility of $33-million, bringing the total capital cost to $109-million.

The higher costs delivered in the PFS resulted from additional capital costs incurred from the redesign of the coal handling and preparation plant, while output in the PFS increased on the back of improvements in average product yield.

“The PFS has confirmed that the Buck Creek No 1 mine is a strategic, high margin, low capital expenditure (capex) asset located in the heartland of the Illinois basin coal industry, one of the world’s best mining jurisdictions,” said Paringa CEO David Gay.

“We are in an enviable position that we have a low capex and permitted coal project with steady-state annual production of 3.8-million tonnes a year that generates strong earnings before interest, tax, depreciation and amortisation (Ebitda) margins of circa 35% in the current market, with further potential for the project’s strong financial returns to materially improve as domestic and international coal markets recover.”

The project is located in what is considered to be one of the best-serviced and infrastructure advantaged coal regions in the US, which assisted in bringing down capital costs, Gay pointed out.

The PFS estimated that the project would deliver an average Ebitda of about $81-million a year at steady-state production, with average yearly operating costs reaching $30.19/t free-on-board.

Gay noted that Paringa would start a bankable feasibility study in the near future, during which time further mine scheduling, geotechnical, coal processing, ventilation, project infrastructure and utility studies would be undertaken to identify further opportunities to enhance the project fundamentals.

The company would also continue negotiations with future customers within the Ohio river market, with the goal of executing forward sales agreements or mine opening contracts.