Cash Minerals study favors Yukon project
Junior releases favorable NI 43-101-compliant pre-feasibility study on 52.5 million-metric-ton Division Mountain coal resource
Last updated 11/30/2008 at Noon
Cash Minerals Ltd. Nov. 17 reported results of a recently completed NI 43-101 pre-feasibility study on the Division Mountain coal property, located in central Yukon Territory. The property contains an estimated measured mineral resource of 52.5 million metric tons of high-volatile bituminous "B" coal, including 26.4 million metric tons of proven mineral reserves.
The study was commissioned in July to re-evaluate previous economic studies of Division Mountain given improvements in export coal markets. Norwest Corp., an energy and mining engineering consultant, conducted the study.
The updated study proposes that the reserves be developed to provide about 2.6 million metric tons per annum in coal production. More than 2 Mt/a of raw coal is projected to be mined and washed to produce a 14 percent ash product for the thermal export coal markets on the Pacific Rim. This results in a yield of 58.3 percent, resulting in an average of about 1.24 million metric tons of thermal coal per year over 10 years to be sold. In addition, it is proposed that about 240,000 t/a of run-of-mine coal would fuel a 50-megawatt "mine-mouth" generating station.
One alternative using previous assumptions of mine planning, took into account long-term price forecasts from a recent market study by the McCloskey Group. It assumes wash yields as predicted from the currently available washability test data and confirms economic reserves and overall project viability.
The updated study revealed that with only a moderate increase in yields, the project's economics can be significantly enhanced. By assuming a relatively small improvement in washability yields of 6.1 percent, an internal rate of return of more than 20 percent may be realized, with a net present value of $50.4 million, using a discount rate of 5 percent.
The financial results demonstrate an economically robust project generating an average pre-tax cash flow of $19.1 million per annum and about $26.2 million with moderate improvements in the net yield, Cash Minerals said.
The studies were based on a 10-year mine life.
Other assumptions included:
More cost-effective operations as a result of further detailed information and detailed mine planning;
Additional study on coal washability, which may lead to significant improvements in project economics;
Increase in production to meet increased industrial demand in the region; and
Further exploration with the goal of defining additional resources of PCI and/or metallurgical grade coal, which could lead to further export potential.
A payback period of less than six years is estimated for the initial capital expenditures of $110 million under one alternative and a payback period of less than four years for another scenario with a similar capital expenditure requirement. Of the $110 million required, $48.5 million is required for mine development, infrastructure and facilities and $61.3 million for mobile equipment.
"The pre-feasibility study on the Division Mountain coal project clearly demonstrates potential for the development of a mine to serve the export coal market, specifically the thermal coal export market, along with the domestic market. This is an exciting prospect as the economics of this project are significantly enhanced while not dependent solely on the domestic market," said Greg Duras, president and CEO of Cash Minerals Ltd.
Junior outlines plans for more analysis
Based on the pre-feasibility study, and previous work conducted on Division Mountain, Cash Minerals said it intends to plan a drill program to perform additional hydro-geological and geotechnical testing and analysis. This program also will be used to better delineate the existing deposit.
New development will place additional demand on the Yukon's energy infrastructure. Coal energy supply options offer substantial opportunities to produce power over the long term at a lower cost than diesel generation in the Yukon.
Cash Minerals said Division Mountain is suitably located and is well positioned with a large coal resource in close proximity to the existing electricity grid to be part of the future prosperity and growth of the Yukon through the generation of affordable, clean and reliable electricity from coal.
The coal deposit is 90 kilometers, or 56 miles, north-northwest of Whitehorse and 290 kilometers, or 180 miles, from the Port of Skagway. It covers 776.4 hectares, or about 1,918 acres. Most of the area of detailed exploration at Division Mountain lies within five coal leases, which grants mining rights for a renewable 21-year term. The remaining area lies within an area covered by another 22 Territorial Coal Exploration Licenses held by Cash Minerals Ltd., which covers about 360,000 hectares, or 889,200 acres, of coal-bearing stratigraphy in the Division Mountain area. These licenses are held under renewable three-year terms.
Exploration was last conducted on the Division Mountain property in 2005 and consisted of four diamond drill holes, which were designed to confirm geological data and to explore target areas outside the defined deposit. The exploration program successfully confirmed the results of earlier drilling and outlined new coal seams on the Corduroy Mountain property, which is located five kilometers east of the Division Mountain coal deposit. The Division Mountain resource estimate was updated based on this drilling in a separate study conducted by Norwest.