An Australia-listed company, County Coal Ltd. (ASX: CCJ), wants to develop two coal mines in the Powder River Basin of Wyoming that would each produce at least 5 million tonnes per year, primarily for the export thermal coal market.
The company said in a May 29 announcement that it will begin a second phase of exploratory drilling at its Shell Creek Coal Project, following a first phase of drilling that was completed in September 2011. The drilling is designed to firm up estimates of an upper coal seam that is up to 150 feet thick, and two lower coal seams, the company noted. County Coal said it has acquired a data package on the property from Chevron and that the property in the 1980s was held by Texaco.
The company’s other project in the Wyoming PRB is called the Miller Creek Coal Project. The company said its aim is to firm up between the two projects at least 1 billion tonnes of coal resources that are compliant with Joint Ore Reserves Committee requirements.
The Shell Creek Coal Project is located in Johnson County near Buffalo, quite a distance west of the existing Wyoming PRB mines. The top seam of the project area, the Lake De Smet seam, is about 150 feet in thickness and is located approximately 350 feet below surface. County Coal said on its website that it believes this should enable a highly efficient low stripping ratio operation. A relatively low overburden and average stripping ratio of about 3.5:1 supports the company’s development plans for Shell Creek. The Lake De Smet coal bed is reputed to be the second thickest coal seam in the world, the company added.
The Miller Coal Project, on the other hand, is located in Campbell County near Gillette, near the existing Wyoming PRB mines. The three project seams – Felix, Smith and Anderson – amount to about 25-30 meters in total thickness, at a depth of 100-300 meters below the surface. The project could support a shallow underground or deep open cut operation, the website said. The Miller Coal Project areas were previously drilled for coalbed methane and logged to provide a profile of the underlying seams and their thicknesses. County Coal Co. LLC has acquired the coal rights covering the project resource held over three state lease sections, amounting to a total area of 1,920 acres.
The company website listed three County Coal directors.
- Robert (Bob) Cameron, Non-executive Chairman, is the founder of Australia’s Centennial Coal Co. Ltd. and was its Managing Director and CEO until June 2011, at which point in time he became its Chairman (non-executive). He has had a long career as a senior manager in the coal industry including 14 years with Coal & Allied Industries in the Hunter Valley of Australia. Centennial Coal operates 10 coal mines in New South Wales, producing around 19 million tonnes per annum. He is past Chairman of the Australian Coal Association, ACA Low Emissions Technology and the NSW Minerals Council.
- David Miller, Non-executive Director, is a Director and CEO of Strathmore Minerals Corp. (a TSX listed mining group). His primary professional focus has been on minerals exploration, development, and mining. His career has spanned over 20 years. He is a member of the Wyoming Legislature, serving District 55–Riverton, the website added. He is the architect responsible for assembling the Miller Coal property, now owned by County Coal.
- Marcus Boland, Executive Director, was previously Director of Corporate, Sydney at national accounting and advisory firm Stanton Partners, and has been involved in corporate advisory for more than 20 years.
The company website lists two advisory panel members.
- Mitch Jakeman has worked in the Australian coal mining industry for over 35 years, the majority of which was spent with global resources companies including BHP Billiton, Shell Coal, Rio Tinto and Anglo Coal Australia.
- Steven Parker is a senior mining executive in the U.S. with 38 years of experience. He was formerly president, CEO and Chairman of Chevron’s Pittsburg & Midway Coal Mining unit.
Building one new PRB mine, let alone two, would be a rare development
It will certainly be interesting to see if County Coal can pull off development of either or both of these PRB mines. The PRB is currently dominated by a handful of major coal producers, including Peabody Energy (NYSE: BTU), Arch Coal (NYSE: ACI), Alpha Natural Resources (NYSE: ANR) and Cloud Peak Energy (NYSE: CLD). Their existing mines can usually crank out a lot of extra coal with relatively little new capital investment, which tends to keep potential competitors at bay. New mines are rarely developed in the PRB, in part for that reason.
PRB coal, relatively low in Btu content, has traditionally attracted little interest on the export market. But interest has picked up in the last couple of years as booming Asian economies like India and China have begun to outstrip production and shipment capacities in major coal producing countries, like Australia and Indonesia, that are nearer those markets. Also, coal quality is steadily declining as the Australians and Indonesians expand into more marginal reserves, which starts to make PRB coal look more attractive.
One issue with expanded PRB exports is the lack of a dedicated U.S. coal export terminal on the West Coast. Several companies, including Australia’s Ambre Energy Ltd., have export terminal projects in the works in Oregon and Washington, but those projects are running into environmental opposition. Current PRB export coal is largely railed to underutilized coal export terminals in British Columbia. But capacity there wouldn’t support major PRB export expansion, plus the extra rail distance adds to transportation costs.
Ambre Energy, by the way, got an Australian accent going in the PRB coal industry with its buy last year of a 50% operating interest in the Decker mine in Montana, along with a 50% interest in the non-PRB Black Butte mine in Wyoming.