The U.S. Bureau of Land Management office in Colorado said on May 16 that it has leased a 726-acre tract for $990,264 to Oxbow Mining LLC, with that lease covering about 4 million tons of recoverable coal in the Elk Creek area in Gunnison County.
Oxbow currently operates the Elk Creek longwall mine, with this new lease expanding Oxbow’s existing underground mining operations for an additional year. All BLM underground coal leases are subject to an annual rental fee of $3 per acre as well as an 8% royalty payment for developed coal.
The Oxbow mine employs between 250 and 335 miners and generates approximately $7.6m in royalties – of which approximately 50% goes back to the state of Colorado, BLM noted.
BLM had previously said this tract contains an estimated 3.96 million tons of recoverable coal. The estimated coal quality in the D seam on an as-received basis is: 12,005 Btu/lb; 34.72% volatile matter; 7.47% moisture; 0.67% sulfur; and 11.27% ash.
U.S. Mine Safety and Health Administration data shows that the Elk Creek mine produced only 570,841 tons in the first quarter of this year, down from a pace that saw 3 million tons of production in all of 2011 and 3.8 million tons in all of 2010. Oxbow Mining is looking to explore the federal Oak Mesa coal reserve nearby as it looks at a mine to replace Elk Creek when it runs out of coal in a few years.