Australian company leasing new coal reserves for Utah mine

The U.S. Bureau of Land Management said in a brief public notice that on May 22 it began an environmental review of an application from Wasatch Natural Resources to lease 5,500 acres of federal coal reserves near Scofield, Utah.

The proposed Long Canyon coal lease tract is adjacent to the applicant’s private coal holdings for the Kinney Mine Project, BLM said. The general location of the property is three miles east of Scofield, along a north-south ridge. Lease by applications like this one usually take at least two years of BLM work, including an environmental review process, before BLM can hold a lease auction. Arch Coal‘s (NYSE: ACI) Skyline longwall mine is fairly near, but possibly not close enough to draw a competing bid from Arch for the Long Canyon reserve.

Australia-based New Horizon Coal Ltd. (NHO) said in a recent report on its January-March quarterly activities that it applied in February with BLM for a lease on 2,248 hectares of coal reserves for its Kinney mine project in the Long Canyon reserve. The conversion on 2,248 hectares is 5,555 acres. Wasatch Natural Resources is a New Horizon subsidiary. The report has a map that shows the Long Canyon reserve as northeast of the planned Kinney No. 2 mine entries, with the southeast corner of the Long Canyon reserve not that far north of the Skyline rail loadout.

New Horizon said it plans also in the next few months to submit a lease by application on 1,750 hectares (4,324 acres) of underground federal coal leases about 50 kilometers from the Kinney Project. That implies a whole new project, with no further details given.

“The Company has identified and initiated due diligence on two additional projects located within the Western United States,” said the quarterly report. “If acquired, these projects will complement Kinney’s production, coal quality, sales and marketing aspects. One of the two properties currently being evaluated covers approximately 7,885 hectares of contiguous underground mining reserves containing two major coal seams. A second property contains a sizable reserve of surface‐minable coal at strip ratios as low as 2.5:1. NHO will continue to evaluate additional mining opportunities in the Western US as they arise, with the goal of becoming a mid‐tier coal producer.”

New Horizon said in a February investor presentation that its newly-acquired, undeveloped Kinney No. 2 underground coal mine in Utah is on track for development and targeted for first production in the second half of 2013. Infrastructure for the mine is in place for export, with adjacent rail (on the Union Pacific railroad), power and utilities. This is a superior thermal coal, with a calorific value ranging between 6,500 to 6,780 kcal/kg (as received basis) with estimated 7.0% to 9.5% ash and 0.5% to 0.9% sulfur, the company said.

An initial Joint Ore Reserves Committee (JORC)-compliant resource delineated by consultant Behre Dolbear stands at 26.1 million tonnes (with 92% in the measured and indicated categories), said the presentation. There is a substantial further resource upside on other parts of the Kinney lease and adjacent BLM land. The company said it is in the process of lodging a lease application with BLM that includes four additional lease parcels, called North, South, Broads Canyon and Clear Creek. Within the project area, the targeted Hiawatha seam ranges from 1.5 meters to 3.3 meters in thickness and dips an average of 3.5 degrees northeast.

New Horizon has contracted with John T. Boyd Co., a mining consulting firm, for the pre‐feasibility study (PFS) for the Kinney project. The PFS is the first stage of the Bankable Feasibility process, which commenced after project acquisition. The PFS follows the completion and announcement of the JORC Resource report in February. Also, New Horizon has engaged Taggart Global to work alongside John T. Boyd in preparing design, capital and operating costs related to coal handling, processing and loadout facilities for the Kinney project.

New Horizon’s Managing Director is Mike Placha, the February presentation shows. He was Senior Vice President with Montana coal miner Signal Peak Energy (2005‐2010), a former President of SedgmanCanada and spent 16 years at Cyprus Amax Coal.

The COO of the company is Greg Hunt, a veteran coal geologist who guided the Kinney No. 2 mine through the Utah coal permitting process for prior project owner Carbon Resources LLC.

There is a domestic market for this coal with six coal-fired power plants, including three run by PacifiCorp, within a 260-kilometer radius of the project, the presentation said. A number of export alternatives exist, including exporting to Asia, Europe and South America. This coal also could be used as an attractive blender for lesser quality coal exporters in other regions, the presentation added.

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.