Pacific Coal runs into speed bumps, but still expanding its output

Pacific Coal Resources Ltd. (TSXV: PAK) said May 31 that it produced 317,070 tonnes of coal during the first quarter of 2012 at two mines in Colombia, though production could have been higher without unforeseen problems.

Production at the Cerro Largo mine reached 131,895 tonnes, an increase of more than 50% over the previous quarter. Production at La Caypa of 185,175 tonnes was hurt by a two-week disruption at the mine resulting from an illegal work stoppage by employees of the mine contractor, which resulted in lost production of approximately 75,000 tonnes.

Luis Carvajales, CEO of Pacific Coal, said: “We have been proceeding according to plan on both of our producing thermal coal properties – La Caypa and Cerro Largo. Our production and stripping ratios would be in line with our full-year 2012 projections had we not experienced unforeseen and unavoidable production disruptions in the first quarter of 2012. These disruptions, while handled admirably by our personnel, did cost the Company some production. With those situations resolved, we remain committed to lowering our operating costs, improving our stripping ratios, and boosting our production. We are confident that we will achieve all three of these objectives in the coming quarters.”

The company also experienced some logistical disruption at Cerro Largo associated with the collapse of a bridge on haul route on Dec. 26, 2011, which forced an additional 200-kilometer detour until Feb. 21. However, the cost impact was mitigated and transport ensured by the utilization of the company’s own truck fleet. Additional fuel and transportation charges for the first quarter of 2012 at Cerro Largo as a result of this disruption totaled $2.83/tonne.

As a result of the production shortfalls in the first quarter of 2012, production for the full year at La Caypa is expected to be 1.3 million tonnes, including coal from the South Pit expansion, down from previous guidance of 1.4 million tonnes.

At Cerro Largo, commissioning of additional equipment by the operator will allow the company to increase production. However, due to footwall instability in conjunction with heavy rainfall, planned 2012 production has been reduced from 800,000 tonnes to 700,000 tonnes.

The Pacific Coal’s total 2012 forecasted production is now 2 million tonnes, a projected 40% increase from 2011 production.

Pacific Coal is a Canadian-based mining company focused on coal, coking coal, asphalt and asphaltite exploration, development and production from producing, development-stage and exploration-stage properties in Colombia.

Colombia is a rapidly-growing coal producer, with most of that coal headed to export, including to power generators along the Gulf and Atlantic coasts of the U.S. Other coal producers in the country are also expanding production, including Alabama-based Drummond Co. (along with a new Japanese partner), and the three international mining houses that own the big Cerrejon strip operation.

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.