MMEX studies ways to get met coal cheaply out of Colombia

Dallas-based MMEX Mining Corp. (OTCBB: MMEX) said Oct. 10 that it has received a third party comprehensive study on the transportation and infrastructure for development of metallurgical coal mining projects in Colombia.

Since its entry into Colombia in 2010, the company said it has recognized that access to export markets depends upon challenging infrastructure and transportation systems since all coal transported from the interior metallurgical producing areas is dependent upon trucking. Steam coal, which forms the bulk of Colombia’s coal production, can often move by more economical rail and/or barge routing.

With this study, performed by an outside consultant with experience in Colombia, MMEX said it has confirmed that significant volumes of potential production can be transported at reasonable costs and capital expenditure to improve roadway availability. The study presents current projected transport model costs to the two ports of Barranquilla (Caribbean and Atlantic coast) and Puerto Buenaventura (Pacific coast) of: trucking only at a cost of US$51 to $57 per ton; intermodal trucks and river barge at a cost of US$53-57 per ton; and intermodal truck and train (when completed) at a cost of US$39 to $41 per ton.

The study also confirms that with a relatively low capital cost to build a road that would by-pass population centers, production levels of up to 2.4 million tons per year, the maximum within the company’s current existing permits, can be transported. By comparison, some of the largest met coal mines in Colombia currently produce 500,000 to 700,000 tons per year.

Also, in March 2012, MMEX said it successfully completed an initial equity capital raise in Lima, Peru, through its engagements with Lima-based brokerage firms. The corporation said it continues to review potential projects in metallurgical coal in Colombia and other mining projects in Peru.

Jack Hanks, MMEX President and CEO, said: “This Study is a major milestone to our development plans in Colombia and significantly improves the economics of our coal projects confirming that we have the potential to produce and transport much higher volumes of met coal with lower transportation costs and capital expenditures for road infrastructure. This underscores our strategy to attract and invest more capital to develop much higher levels of production and become a major met coal producer in Colombia.”

MMEX is a company that, in a prior incarnation under the name of Management Energy Inc., was pursuing coal reserve development in Montana. But that focus shifted to Colombia when Hanks, who has prior experience in South America, took control. In March of this year, the company completed a buy of an interest in the Hunza coal mine in Colombia, MMEX reported in a Sept. 14 Form 10-Q filing at the SEC.

“In 2012, the primary operational activities of Hunza have been initiating the community relations activities in advance of the commencement of the work program to be carried out on the Hunza Project as recommended in the Technical Report,” said the Form 10-Q. “In 2012, Hunza also initiated a transportation and logistics feasibility study for marketing of coal, an update of the initial mine plan and a marketing study for metallurgical coal. With respect to the drilling program, negotiations are underway with the sub-contractor to finalize and to mobilize the drilling operations. Hunza has also engaged a Colombian underground mining operator to develop a complete pre-feasibility and feasibility mining plan for the mine development on the Hunza Project with a Small Scale Mining Plan for extraction of up 240,000 tons per year and a Large Scale Mining Plan providing for the increase in the production to 2,400,000 tons per year over the course of seven years. Additionally, in January and February 2012, Hunza obtained environmental and mining permits allowing for the production of up to 2,400,000 tons per year. No mining activities have taken place on the Hunza Project in 2012.”

The March buy was a 50% interest in C.I. Hunza Coal Ltd., which holds mining concessions in the Boyacá Province of east-central Colombia. The coal prospects in the Hunza concessions are mid-vol coking coal. The company commissioned a technical report under National Instrument 43-101 specifications. Based on the report, the in-place coal tonnage estimate for the property is in the range of 45 million to 50 million metric tons.

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.