Canada’s Cobalt Coal expands operations into Virginia

Canada-listed Cobalt Coal Ltd. (TSX VENTURE:CCF), which up to now has largely depended on a small deep mine in McDowell County, W.Va., said March 8 that it has entered into both an option agreement and a letter of intent for the mining rights to five separate tracts of lands in Virginia.

That prior Cobalt mine is the one featured in a 2011 reality series on the Spike TV cable network called “Coal.”

These five tracts contain potentially significant quantities of metallurgical coal, Cobalt said. These lands are permitted for both production and the construction of a prep plant. The tracts cover a total of 4,900 acres in Virginia. Each tract, containing at least four seams of metallurgical coal, offers Cobalt the potential to commence multiple mines, as has been done historically in the immediate area, the company noted

One tract, called Mill Creek, is contiguous with the tract that was the subject of a Feb. 26 Cobalt announcement about a property acquisition. This is a significant accomplishment as it means that Cobalt has secured the mining rights on the entire contiguous 1,600 acre Mill Creek tract, the company noted. The Mill Creek tract is already permitted for both coal production and the construction of a prep plant. Cobalt said it will be working with the vendors to secure a lease on an existing rail loadout facility located nearby. Cobalt said it can immediately begin infrastructure improvements necessary at the Mill Creek tract, allowing metallurgical coal production to begin immediately upon the closing of these transactions.

Cobalt President and CEO Mike Crowder said: “The agreement signed last week involving a part of the Mill Creek tract together with this signing means that Cobalt has now secured the entire Mill Creek tract and its permit that allows for production as well as for wash plant construction. One must keep in mind how difficult it is now to obtain regulatory approval for a wash plant and therefore how valuable this component of the acquisition is. We look forward to quickly putting the first of numerous mines into production on these new lands.”

Cobalt has entered into an option agreement with Steinman Development Co. providing Cobalt the option to acquire a lease for deep mining rights on five non-contiguous tracts of coal minerals located in Dickenson County, Va. These are the Mill Creek tract (900 acres), the Tarpon tract (900 acres), the Davis tract (1,963 acres), the Stanley tract (337 acres) and the Fleming tract (803 acres). This option is exercisable on or before April 30, which may be extended in certain circumstances.

Simultaneously with entering into the option agreement, Cobalt entered into a letter of intent with Norris Enterprises Co., KDS Energy LLC, KMH Energy Corp., Kenneth Stanley and Kentucky Coal Partners International LLC. Closing of the transactions contemplated by the letter of intent must take place simultaneously with entering into the Steinman lease contemplated by the option agreement.

These parties will assist Cobalt in obtaining a lease from the lessor with respect to a rail loadout site to be located in Addington Station in Wise County, Va. Cobalt will acquire all of the issued and outstanding shares of KMH, the holder of a valid mining permit covering portions of the lessor’s 900-acre Mill Creek tract. Prior to the closing date, KMH will allow Cobalt to conduct site preparation work on, and sell up to 14,000 tons of coal from, the KMH permitted lands.

KMH Energy has no operations listed with the U.S. Mine Safety and Health Administration or an entry in the U.S. Office of Surface Mining’s ownership and control database. Virginia State Corporation Commission records show that it was registered in June 2011 and that its registered agent is Kenneth Stanley of Coeburn, Va. KDS Energy also has Stanley as its registered agent. Commission records show the registered agent for Norris Enterprises as Tommy Bright I out of Coeburn. Steinman Development is not listed in state records. Kentucky Coal Partners International, which was registered with the state in October 2011, has Brett Scott of Washington, D.C., as its organizer.

Cobalt said it has already initiated the preparation of a National Instrument 43-101 compliant report for the acquisitions previously announced and will now expand the scope of that report to include certain of the seams contained in the Mill Creek tract for finalization in advance of formal closing of the transactions. An NI 43-101 report is a very detailed property assessment that is required of Canada-listed mining companies and is released to the public, with no such public report required of U.S.-listed companies.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.