Cline to rework New Elk mine plan based on new reserves

Canada-based Cline Mining (TSX: CMK) said July 3 that it is revising and optimizing the operations of New Elk Coal Co. LLC, which runs a re-started coal mine in Colorado, under the leadership of recently-appointed New Elk COO David Stone.

Stone, formerly with international miner Xstrata plc, is the executive fully responsible for the management of all personnel, management and operations at the New Elk coal mine, situated in Trinidad, southern Colorado.

Taking into account the inclusion of the additional 230.4 million tons of Measured and Indicated (M&I) coal resources identified through the updating of the company’s resource by consultant Agapito Associates, a detailed optimization process has been commenced to ensure that the optimum Net Present Value is achieved for the asset, said Stone.

“It is envisaged that this process should take approximately 10 to 12 weeks and will include short-term volume optimization for a defined ‘Life of Mine’ value maximization,” Stone added. “A forecast will also be developed during this period for the remainder of the 2012 year and a budget for the 2013 year. These actions will enable the provision of appropriate volume and cost guidance as the operation tracks from the completion of the opening project through to Phase 1 of the production cycle. As a result, the Company will not provide production or cost guidance at this time, and previous guidance is currently being reviewed.”

On May 24, Agapito Associates reported a total M&I coal resource for the New Elk coal mine of 618.9 million tons and an additional 104.5 million tons of Inferred coal resource, including an extended Colorado Department of Wildlife coal lease, the recently-acquired Secora Ranch and 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 a 2011 Technical Report from Agapito.

Ken Bates, President, CEO and Director of Cline Mining, said: “The Company is preparing a new mine plan under the guidance of David Stone to maximize the mine’s production and in parallel develop a world class longwall mining complex. The New Elk coal mine holds tremendous potential to be a major, long-term hard coking coal producer. The Company believes that through this thorough planning and review process, the asset will demonstrate its optimum potential so that it is poised for growth as the metallurgical coal market strengthens.”

Despite a currently slack metallurgical coal market, Cline Mining has been working on a detailed engineering report for the introduction of a longwall at New Elk. “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.

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.