Cline Mining extends shutdown of Colorado coal mine

Cline Mining (TSX: CMK) said Sept. 17 that it has decided to continue with a temporary mine stoppage at its New Elk deep mine in Colorado due to a continuing slump in demand for this coal, which is mostly intended for the export metallurgical market.

The company announced on July 11 that it has temporarily suspended production at New Elk in order to manage costs and preserve the company’s financial condition. While the duration of the suspension was expected to be about 60 days, the company, due to current market forces, said it will continue the suspension of operations pending improved market conditions.

Ken Bates, CEO and Director of Cline Mining, said: “The global coal market, in which metallurgical coal prices have decreased sharply over the last two quarters, is incredibly challenging for coal companies at the present moment and is a direct reflection on excess inventories and current soft demand. We are focused on, and committed to, navigating this challenging environment. We have taken all the necessary actions so that we preserve our capital position and conserve our working capital. The implementation of the marketing strategy is also key and we are firmly committed to this process and to achieving a financially viable and economic rate of return for our coal product. The New Elk mine is an asset with long-term potential as markets recover.”

The Canada-based company said it is implementing a long-term marketing strategy to sell its current stockpile and future production at a rate that is financially viable. Though the company anticipates that production will resume, variability of market conditions and other economic factors continue to make it impossible to project an exact personnel return date with certainty.

Mine plan review has continued in the meantime

The technical mine planning review process for New Elk, conducted by recently-appointed New Elk Coal Co. LLC Chief Operating Officer David Stone, has been completed on schedule. The primary focus has been on the development of the Central Zone of the mining lease which provides optimum utilization of existing infrastructure coupled with the highest short-term production output. The technical mine plan review now demonstrates the optimal resource and recovery coupled with the overall focus on increasing the Net Present Value of the asset. The Northern and Southern areas of the lease provide an exceptional upside case and will be developed once the action plan for the Central Zone is complete, the company said. These areas, supplementing the Central Zone, facilitate the ability to perform low-capital brownfields expansion.

The company said it also continues to build appropriate life of mine operating schedules and new financial and cost analysis for the project, and expects to formalize this review and production plan at the time that it resumes production.

Stone said: “The results of the review have clearly demonstrated that the resource can be transformed into a world class mining complex. The entire plan has been built from first principles taking into account geology, equipment and infrastructure. A detailed implementation action plan inclusive of all required factors including safety, human resources, financials, logistics, engineering and maintenance is well underway for the entire operation and we are confident that upon the securing of an off-take agreement the projected plan will be achieved.”

n May, Cline Mining said New Elk had enough workers to operate two super-sections. With two super-sections, the New Elk mine could produce 650,000 tons in 2012. If the company decided to add more employees, it could operate five super-sections. That would have resulted in the production of 1.2 million tons of coal in 2012, against a full, non-longwall operating capacity of 3 million tons of saleable coal per year. But, the company in May said that due to slack market conditions it had decided to operate one and a half super-sections over the short term, which would have generated production of 470,000 clean coal tons in 2012. Then in July it said the mine was being idled entirely.

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.