Australia-based Atrum Coal NL (ASX: ATU) (OTCMKTS: ATRCF) on June 9 provided an update on the Pre-Feasibility Study (PFS) for the Groundhog North Mining Complex, to be located in British Columbia, Canada.
Atrum is currently finalizing a revised PFS for the Groundhog North Mining Complex, which now includes a staged approach to development initially employing a low-cost “starter” mine producing 880,000 tonnes per annum (tpa) of ultra-high grade anthracite. Starter mine economics include total capital requirement of US$142m, with 64% funded by third parties (the majority through the equipment financing arrangement with China Coal Technology and Engineering Group).
Potential major customers for Atrum’s anthracite are now requesting access to bulk samples for testing. Following the grant of a Bulk Sample Permit, the Atrum team has commenced preparations for site works.
Over the last year the company has been updating the PFS based on additional studies. In preparing the revised PFS, the company has evaluated a number of small scale starter mine options that accelerate early cash flows for minimal capital cost which maximize shareholder returns. The company has now started engaging with potential strategic and financial investors in relation to funding the bulk sample extraction and ultimately, subject to permitting, a small scale starter mine development.
Robert Bell, Executive Chairman, commented: The award of the Bulk Sample Permit and the updated PFS with the smaller, starter mine demonstrates the economic viability of the Groundhog North project and accelerates Atrum’s plans to achieving commercial production. We can now proceed with detailed discussions with potential long-terms buyers of Groundhog anthracite, as well as potential strategic and financial investors. We will update the market as these discussions deliver partners that share our vision to become a world class, low cost, anthracite producer.
“The supply-demand dynamic of high-grade and ultra-high grade anthracite used in metals manufacture, filtration, plastics manufacture, for briquettes and for specialty carbon products continues to be encouraging for Atrum’s near term entry to production. Global seaborne supply of anthracite has halved over the past decade, creating a structural supply shortage of anthracite.”
In the updated PFS, the company has adopted a staged approach to development, beginning with a low capital cost underground mine, capable of producing up to 880,000 tpa of saleable ultra-high-grade anthracite. The updated PFS, when finalized, will include subsequent development stages for the larger underground operations at the Groundhog North Complex. The smaller, starter mine will allow the Company to:
- establish operations in the area;
- prove the logistics chain for transporting larger amounts of product;
- continue to develop long term and sustainable relationships with the company’s aboriginal partners;
- train aboriginal and local personnel to build a workforce that will support sustainable, long-term operations;
- establish customer channels;
- investigate alternative high value markets;
- increase debt funding potential for the larger underground mini-wall operations and thus provide superior shareholder returns, by leveraging greater debt servicing ratios from cash reserves;
- generate early cash flows, not just for the company, but for local families, contractors, communities, and government; and
- build credibility with a range of key stakeholders, including parties interested in the company’s growth and value potential.
From the small-scale starter mine, numerous development paths can be selected from a staged ramp-up to a 1.6 Mtpa continuous miner operation through to a larger mini-wall operation.
Forecast operating costs of the starter mine are competitive with other anthracite exporters, and well below current available pricing for high-grade anthracite, subsequently producing strong average EBITDA margins, Atrum said. The continuous miner operation will use modern roof-bolt methods for improved strata control, and a modified pillar extraction method for maximum resource utilisation. Run-of-mine coal will be transported by conveyor to a small, modular coal handling and preparation plant, for beneficiation into primary, low-ash lump and fine products. Product yields from the Duke E seam can reach up to 85%, but the financial analysis of the starter mine uses conservative 62.5% yield estimates. Transport from the mine will be via road and rail to export ports in Stewart and Prince Rupert.
Global anthracite markets remain undersupplied, and market prices for anthracite are strong, the company added. Current prices for imported anthracite are approximately US$150/tonne for lumps and US$100/tonne for fines (basis 5% volatile matter; 12% ash).
Atrum said: “The premium in anthracite pricing has remained throughout the coking coal cycle and as metallurgical coals increase in price due to supply/demand imbalances, anthracite has maintained and in some cases, improved its relative price position. With the growth in specialty markets, anthracite is enjoying increased demand, leading larger metallurgical coal companies, steel mills, traders and carbon suppliers to look for emerging supply sources in a tight market. With the award of the Bulk Sample Permit, Atrum’s Groundhog resource has been enjoying significant interest from potential customers and off-takers, including for speciality anthracite.”
Speciality markets include water filtration, electric arc furnaces, chemical production, plastics manufacture and the conversion of anthracite into synthetic graphite for electric vehicle batteries.
The company is preparing for site operations to extract bulk samples for potential customers, primarily in Japan and Korea, although since the award of the permit, there has been strong interest from other carbon users for samples of Groundhog anthracite. The award of the Bulk Sample Permit and upcoming commencement of onsite activities represent a major milestone and phase change as the company transitions from exploration to mining.
The company has been preparing a development plan that outlines how anthracite mined under the Bulk Sample Permit will be transported offsite for processing and distribution to potential long-term customers in North America, Europe and Asia. Establishing the transportation route will allow Atrum to demonstrate its capability to develop a reliable and sustainable supply chain from the world’s largest high grade / ultra-high grade anthracite deposit to Atrum’s customers.