Canada-listed Cline Mining Corp. said Dec. 30 that it has run into some regulatory delays lately, but has been making good progress in ramping up coal production at the New Elk mine in Las Animas County in southeastern Colorado.
New Elk, which had been shut for many years before a recent restart by Cline Mining, is a huge new development for the Colorado coal industry, which has seen declining production recently due in large part to problem geology at some mines and also the broader impacts of the recent recession. New Elk is in the Raton Basin, far away from the other existing coal mines in Colorado.
The New Elk metallurgical coal mine is being brought into full commercial production at a rate of 3 million tons of saleable coal annually during its initial 20-year mine project plan period. This production rate is expected to be attained during the first half of 2012. Saleable coal production during calendar year 2012 is now projected at 2.5 million tons.
Development of the staging area in the Apache Seam North was completed in November 2011, permitting excavation and construction of three new parallel slopes down 260 linear feet to intersect the Allen seam. The Allen seam was intersected on Dec. 14, 2011, and development commenced to accommodate the first two continuous miner (CM) units and form the first mining super-section in the seam. The first super-section in the Allen seam will be added by Jan. 15, 2012, with production from the seam to begin thereafter. Two additional CMs will be added in the Allen seam in March 2012 and form the second super-section in the seam. Each super-section will produce about 600,000 tons of saleable coal annually. The Allen seam in this area is 5.5 feet thick, and contains the high quality metallurgical coal previously mined successfully in the old Allen mine, the company noted.
Development of the surface staging area for accessing the Blue seam was completed in August 2011, permitting excavation and construction of three new parallel slopes down 500 linear feet into the Blue seam. The Blue seam was intersected by all of the three slopes by Nov. 15, 2011. The Blue seam is about 6 feet thick in this area and contains very clean hard coking coal with excellent quality specifications. Regulatory approvals are in place to allow the ventilation and initial coal mining to proceed through the first week of January. Regulatory approval to allow regular ongoing mining operation in the Blue seam uner the mining plan is expected by the first week of January.
Due to unavoidable regulatory delays, the development of the first 7-entry room and pillar mining layout in the Blue seam was delayed but will be mobilized as soon as regulatory approval has been received. At that time, two CMs will be introduced into the Blue seam forming one super-section. However, as a consequence of the regulatory delays, production is now forecasted at 2.5 million tons of saleable coal in 2012 and 3 million tons of saleable coal in each year thereafter. The second super-section is to be added into the Blue seam in February 2012 and the third in April 2012. At that point, the company will have all ten CMs employed underground between the Allen and Blue seams, comprising five super-sections in all with a nominal clean coal production capacity of about 3 million tons of saleable coal annually.
The Allen, Blue and Maxwell seams are scheduled to provide all of the 3 million tons of coal annually under the first phase of the mine plan. The first phase provides for the production and sale of a total of 56 million tons of coal during the first 20 years. Production to the end of December 2011 is expected to be about 30,000 tons of saleable coal, the result of mining exclusively in the Apache seam up to the present time in a combined development and coal production mode.
Cline Mining has commissioned the preparation of an independent National Instrument 43-101-compliant engineering report for the expansion of the New Elk mine from its present first phase mine plan of 3 million tons of saleable coal annually to a projected 7.2 million tons of saleable coal annually including a feasibility study on the full expanded mine. The mine expansion would include installation of a highly-productive longwall to supplement the CMs. The engineering report and feasibility study are expected to be delivered to the company during the first half of 2012.
National Instrument 43-101 is a Canadian standard for publicly-traded mining companies that requires reports on coal reserves to be prepared under rigorous guidelines.
New Elk is unusual both because of its location in Colorado, far from other coal mines in the state, and also because it produces a metallurgical coal. The existing coal mines in the state, including five equipped with longwalls, are largely dependent on the power generation market for customers. That includes in-state power generators, like Public Service Co. of Colorado and Tri-State Generation, and out-of-state customers like the Tennessee Valley Authority.
Colorado coal output has staged something of a rebound lately, with U.S. Energy Information Administration figures showing production of 25.4 million tons in the first 11 months of 2011, up from 23.3 million tons in the January-November period of 2010. EIA data shows Colorado coal production of 25.2 million tons in all of 2010, down sharply from 28.3 million tons in all of 2009.