Report outlines plans for new Cobalt Coal reserve tracts in Virginia

Cobalt Coal Ltd., a Canada-listed producer of coal in McDowell County, W.Va., filed a technical report on July 17 with Canadian regulators describing six coal properties that Cobalt plans to buy in southwest Virginia.

Cobalt commissioned Engineering Services Inc. (ESI) to prepare the report on five separate tracts owned by Steinman Development Corp., as well as on one tract owned by ACIN LLC. The lands owned by ACIN are contiguous with one of the Steinman tracts, that being the Mill Creek Tract. The six tracts totals about 5,339 acres. The Mill Creek Tract has been permitted for production by KMH Energy Inc. KMH’s permit provides that a coal cleaning plant may also be constructed. The ACIN lands have been previously leased to C&B Coal LLC.

Cobalt has entered into separate purchase or option agreements with each of Steinman, KMH and C&B whereby it will purchase the shares of KMH and C&B and concurrently obtain a lease on the Steinman lands from Steinman, the report noted. All of the tracts are located in Dickenson County, Va.

The tracts cover several coal bearing strata of the Pocahontas, Lee and Norton formations of the Pottsville group of the Pennsylvanian period. They include numerous low to high quality bituminous coal seams, many of which are targets for production of metallurgical coal. KMH has already conducted mine preparation work in anticipation of commencing production from underground mines in the Hagy and Splashdam seams on the Mill Creek Tract.

Two of the six tracts are of interest for immediate development, the report noted. Their Steinman/ACIN designations are the “Mill Creek Tract” (a combination of the ACIN Tract and the Steinman “Mill Creek Tract”) and the “Davis Tract.” Only the coal resources in the Hagy and Splashdam seams on the Mill Creek Tract, and the Upper Banner and Lower Banner seams on the Davis Tract, have been economically evaluated. The analysis supports the classification of these resources as Proven Reserves. The coal shown to exist in the balance of the seams has remained classified as Coal Resources.

U.S. Mine Safety and Health Administration regulations provide for mining to a 50 foot barrier against old mine workings as long as the specified mining practice is followed. This is applicable for only the Upper Banner seam on the Davis Tract and a small area in the Splashdam seam on the Mill Creek Tract as old mine workings are known to exist in these seams. It is not applicable in the case of the Hagy seam or in the southern section of the Splashdam and Lower Banner seams on the Mill Creek and Davis Tracts insofar as no other old mine workings are known to exist within those seams on those tracts. Total Reserves have been calculated based on compliance with these regulations regarding setback. Proven reserves total 15,874,000 tons.

There is an existing mine permit for the Mill Creek Tract

KMH presently holds a mining permit issued by the Virginia Department of Mines, Minerals and Energy on the Mill Creek Tract. This tract is located on the waters of Mill Creek of the McClure River of the Big Sandy River Watershed. The operation is permitted for surface mine operations necessary for the preparation of multiple underground mine portals in the Hagy and Splashdam seams and for a coal cleaning facility with associated refuse fill.

The Davis Tract has not yet been permitted for production. Permitting is expected to be obtained within 12 months of closing based on current experience. The Davis Tract is located along Route 72 between Clintwood and Coeburn. Proven Reserves are contained in the Upper Banner seam and the Lower Banner seam on the Davis Tract.

The coal seams on the Mill Creek Tract and the Davis Tract are flat lying to very gently dipping and are generally unfaulted, said the report. These tracts contain underground mineable deposits. The remaining seams (other than the Hagy and Splashdam seams on the Mill Creek Tract and the Upper Banner and Lower Banner seams on the Davis Tract) have not been economically evaluated in this technical report.

Here is a description of the six tracts.

Mill Creek Tract: This tract has historic underground and surface mining since the early 1900s in the Upper Banner seam. Sporadic mining in the other seams was conducted until the mid 1980s. KMH was subsequently granted a permit to clean up a refuse pile and to conduct a surface mine operation for the remnants of the Upper Banner seam and to begin mining in the Splashdam seam. Mining the Splashdam seam was desired due to the excellent quality of the seam as a metallurgical (coking) coal and can be accomplished on a surface mining basis to create a highwall and then subsequently using underground mining techniques. Surface mining to complete a highwall face has been completed such that the Splashdam seam is exposed for the application of underground mining.

ACIN Tract: Some surface mining occurred in the Hagy seam in the late 1960s. Mining of the Upper Banner seam was a priority in this area in the 1970s and 1980s. No further underground mining has occurred on this tract.

Tarpon Tract: This tract has had minimal development as the seams were not economically viable in the past. Surface mining of the Hagy, Splashdam and Upper Banner seams and deep mining of the Upper Banner seam was conducted during the late 1990s and early 2000s, but only limited underground mining has been conducted.

Davis Tract: This tract was under lease to Virginia Iron Coal and Coke until the late 1980s. During the leased period, the Upper Banner seam was deep and surface mined. Some surface mining of the Lower Banner seam occurred prior to the VICC lease. The Lower Banner seam has not been underground mined on the Davis tract.

Fleming Tract: This tract has had extensive mining of the Upper Banner seam in the 1950s and 1960s. Little or no mining was attempted on the other seams, the report noted.

Stanley Tract: This tract has had surface mining in the Upper Banner seam.

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.