Cobalt Coal Ltd. (TSX VENTURE: CCF) has filed an amended technical report with Canadian regulators on coal reserves that it plans to buy in Virginia, expanding from its current operations base in McDowell County, W.Va.
The “KMH/C&B Acquisitions” cover 51.4 million tons of measured and 68.3 million tons of indicated coal, with another 127.6 million tons of inferred coal. These coal resources estimated are situated on six different tracts, each containing multiple seams of coal. An economic evaluation supported that the coal resources contained in those seams can be classified as proven coal reserves. The quality information for these four seams has established that they are mid-vol metallurgical coals.
Cobalt said it will be acquiring leases on six separate tracts covering approximately 5,400 acres which lie within the drainage areas of the Cranes Nest River in Dickenson County, Va. Numerous seams of coal which are historically mid-vol met coal have been identified to exist on the tracts including the Hagy, Splashdam, Upper Banner, Lower Banner, Raven, Jawbone, Upper Seaboard, Middle Seaboard, War Creek, Lower Horsepen, and Pocahontas No.3. One of the tracts to be acquired, the Mill Creek Tract, about 900 acres in size, is currently permitted for both surface and underground mining, with a pending amendment to include an adjoining lease, approximately 700 acres, which will also be acquired by Cobalt under the C&B acquisition.
The C&B Acquisition involves lands covering about 700 acres that are immediately adjacent to the Mill Creek Tract being acquired pursuant to the KMH Acquisition, which means that the Mill Creek Tract will expand in size from about 900 acres to approximately 1,600 acres and is the subject of the permit extension. Proven reserves of mid-vol met coal were established in two seams on this tract; the Hagy and Splashdam seams.
Two of the six tracts are of interest for immediate development – the Mill Creek and the Davis tracts. 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 in the amended report.
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, Cobalt said.
Report outlines tentative production schedule
The projected mining schedule contained in the original report and in the amended report are the same. Each projected mining to commence in the Hagy seam (Mill Creek Tract) with one continuous miner. Subject to the availability of financing, the amended report assumed that a second continuous miner will be added four months later. Production volumes in the amended report were estimated to begin at 5,500 clean tons for the first month of production increasing to 9,400 clean tons for the second month and increasing to 16,934 clean tons for the remaining months and annualized production was estimated at 203,212 clean tons per year per section from this first seam.
- Mining of the Splashdam seam (Mill Creek Tract) is forecast to begin in January 2013 with the same ramp up schedule the same as for the Hagy seam. Two continuous miners are included on each of the Hagy and Splashdam seams per mine producing coal with the Splashdam seam production at 163,868 clean tons per year per section.
- Production from the Lower Banner seam (Davis Tract) is forecast to begin in 2014 with a second continuous miner added in 2015. The production in the Lower Banner seam is estimated at 214,594 clean tons per year per section.
- Production from the Upper Banner seam (Davis Tract) is forecast to begin during January 2014 and continue for 14 years. Production is estimated at 96,000 clean tons per year with one conventional section of equipment.
Said the amended report: “Cobalt Coal Ltd (‘Cobalt’) has commissioned ESI, Inc. (Engineering Services) to prepare a Technical Report on five (5) separate tracts of coal bearing lands owned by Steinman Development Corporation (‘Steinman’) as well as on one tract of coal bearing lands owned by ACIN, LLC (‘ACIN’). The lands owned by ACIN are contiguous with one of the Steinman tracts, that being the Mill Creek tract (‘Mill Creek Tract’). In total, the six tracts resulting from a combination of the Steinman and ACIN lands totals approximately 5,339 acres (the ‘Tracts’). The Mill Creek Tract has been permitted for production by KMH Energy Inc. (‘KMH’). KMH’s permit (‘KMH Permit’) provides that a coal cleaning plant may also be constructed. The ACIN lands have been previously leased to C&B Coal, LLC (‘C&B’). 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. All of the Tracts are located in Dickenson County in the Commonwealth of Virginia.”