Fortune, POSCO advancing British Columbia met coal project

Fortune Minerals Ltd. (TSX-FT) (OTCQX-FTMDF) and POSCO Canada Ltd. (POSCAN) unveiled Oct. 15 the results of an updated Definitive Feasibility Study (DFS) for the Arctos Anthracite Project in northwestern British Columbia, Canada.

Arctos, formerly known as the Mount Klappan project, is a collaborative international development project by the Arctos Anthracite Joint Venture (AAJV) between Fortune (80%) and POSCAN (20%), the Canadian subsidiary of Korea’s POSCO, one of the world’s largest steel producers. The updated DFS was prepared by Marston, a Golder Associates company. It incorporates the results of additional drilling and survey data for the Lost Fox deposit area, which together with updated operating and capital costs, confirms an increase in reserves and robust economics for the Arctos project.

Because of a more rapid planned project start-up, initial capital costs to achieve commercial production has increased only 2.6% over the initial capital in the previous 2010 DFS, the companies noted. The updated FOBT cash cost of C$127.61/tonne would place Arctos among the lowest cost Canadian met coal producers. Innovation in the global steel industry continues to drive the increased use of anthracite in the manufacture of steel and in metal processing, while scarcity of high quality deposits and declining exports from the traditional suppliers highlights the importance of having a new reliable Canadian source of supply, the companies said.

Highlights of the updated DFS include:

  • a 17.5% increase in Run of Mine (ROM) Coal Reserves to 124.9 million tonnes and 13.8% increase in 10% Ash Product Reserves to 69.2 million tonnes in the Lost Fox deposit area;
  • extension of mine life from 20 to 25 years;
  • production of premium pulverized coal injection (PCI) coal used to manufacture steel;
  • ability to diversify production to other metallurgical coal products that are short of supply;
  • initial capital (first 3 years) of C$788.6m for the mine, surface facilities and railway;
  • cash cost FOBT loading vessel in Prince Rupert of C$127.61/tonne (US$121.22/tonne);
  • expansion case from 3 million to 4 million tonnes per annum in year eight of the mine life, increases pre-tax IRR to 17.5% and 8% discounted NPV to C$657.1m;  and
  • advancing railway transport of this coal to port with Canadian National Railway (CN) and the British Columbia government.

The AAJV is proceeding with the Environmental Assessment (EA) and community engagement to permit the proposed open pit mine, wash plant and railway infrastructure. The railway expansion for the Arctos project is a high priority for both the AAJV and CN which is collaborating on this initiative, which is also consistent with the BC government Pacific Gateway Policy that includes significant investments in rail, port and power infrastructure in the northwest part of the province. Rail provides a simple and scalable transportation solution for hauling coal from the mine to the port of Prince Rupert for export of products to the global steel industry. Deloitte & Touche Corporate Finance Canada Inc. is continuing to work with Fortune as its financial advisor with a mandate to help identify additional strategic partners to provide financing for the Arctos project.

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.