New Elk Coal Co. LLC, a wholly owned subsidiary of Cline Mining (TSX: CMK), has entered into an agreement with the Department of Wildlife of the state of Colorado (DOW), significantly extending its present DOW coal mining property area at its New Elk coal mine in Las Animas County, said Cline on May 24.
The initial New Elk DOW coal mine lease covers an area of 15,553 acres, and the extension area will add a further 14,387 contiguous acres to the initial DOW lease, resulting in a new total coal lease area of 29,940 acres. The company said it has also purchased the Secora Ranch, or “Pacesetter” property, north of the mine portals, expanding the New Elk mine property and coal resource by another 1,346 contiguous acres.
The DOW extended lease area and Secora Ranch are coal bearing and the company has commissioned consultant Agapito Associates Inc. to prepare a National Instrument 43-101 Technical Report of coal resources on the new acreage and to update the mineral resource for the entire property based on results from the New Elk 2011 and 2012 exploration drilling programs.
Agapito reports that the extended DOW lease contains a 550 million ton measured and indicated (M&I) coal resource, representing a 219.6 million ton increase over the 330.3 million ton resource reported in a NI 43-101 report from May 2011. Of the 219.6 million ton increase, 47.6 million tons are the result of the extended lease acreage and 2011-12 exploration drilling. The remaining 172.0 million tons is the result of four new low-sulfur, high-volatile, B bituminous coal seams that were defined by exploration drilling and subsequently added to the resource: the Green, Loco, Bing Canyon Upper, and Red seams. These seams are in addition to the four original seams reported in the 2011 report: the Blue, Maxwell, Apache, and Allen seams.
The DOW lease extension increases the inferred resource in the original Blue, Maxwell, Apache, and Allen seams by 25.1 million tons, from 22.7 million to 47.8 million tons. The new seams – the Green, Loco, Bing Canyon Upper and Red – contribute another 56.1 million tons to the inferred resource within the DOW lease.
Agapito reports a total M&I coal resource for the New Elk property of 618.9 million tons and an additional 104.5 million tons of Inferred coal resource, including the extended DOW lease, the recently acquired Secora Ranch, and the four new coal seams. This represents an increase of 230.4 million tons of M&I coal resource and 81.8 million tons of Inferred coal resource from the 2011 report.
Despite a currently slack metallurgical coal market, Cline is continuing with detailed engineering for the introduction of a longwall at its New Elk room-and-pillar mine in southeast Colorado. “The Company anticipates publishing the engineering report during 2012,” said a May 14 financial filing by Cline in Canada. “The longwall system would supplement the present room and pillar mining system to produce incremental and additional saleable coal. The longwall system could be brought into operation in 2015, subject to timely approvals in the normal course. The objective is to increase New Elk mine production to approximately 7.0 million tons of saleable coal per annum, through the addition of the longwall system in the mine and reduce operating cost by about [C]$20 per ton through more efficient longwall operation.”
Cline noted that this year, based on equipment and personnel, the mine could produce up to 1.2 million tons. But, due to a poor market right now, the company has decided to operate one and a half super-sections over the short term. This alternative would generate production of 470,000 clean coal tons in 2012 and matches closely the company’s anticipated forecast of sales for 2012. The mine could produce as much as 3 million tons per year in the room-and-pillar configuration.