CHX in Yukon: trucking coal down to a waiting ship would be pretty easy.
The Division Mountain coal deposit is located 90 km north-northwest of Whitehorse in southwestern Yukon Territory. Access is by a 31 km four-wheel drive road leaving the Klondike Highway at Braeburn. The main area of exploration interest lies 20 km west of the highway and parallels the Yukon Energy Corporation electrical transmission grid. This point is 280 km by road from a year-round tidewater port at Skagway, Alaska.
The coal deposit is 100 % owned by Cash Minerals Ltd. Most of the area of detailed exploration at Division Mountain lies within five coal leases which grant mining rights for a renewable 21-year term. In addition the company owns 22 Territorial Coal Exploration Licences encompassing approximately 360,000 hectares of coal bearing stratigraphy in the Division Mountain area. These were acquired in October 1992 and are held under renewable three-year terms.
In addition to the exploration work, geologic and economic studies that have been conducted on the project, the Company has also carried out wide ranging environmental surveys in anticipation of application for mining permits as well as extensive consultation with local communities in the region including Champagne and Aishihik First Nations whereby both parties have agreed to consider possible joint venture projects (Division Mountain coal property borders with that of Champagne and Aishihik), municipal, territorial and federal levels of Government.
Exploration at Division Mountain has been directed toward outlining sufficient resources to support an export thermal coal mine and/or a 20 MW to 50 MW generating station for a period in excess of twenty years. Exploration on the property between 1972 and 1999 consisted of 10.2 km of excavator trenching, 64 diamond drill holes totaling 10,555 m and 20 reverse circulation percussion drill holes totaling 1869m.
Cash Minerals announced on April 28th/2005 that it had received the "Division Mountain Scoping Study" which was completed by Norwest Corporation, a leading North American coal and engineering consultancy, dated April 13, 2005, which supports the potential for the economic development of an open pit mine based on the annual production of approximately 1.375 million tonnes of saleable coal.
The Scoping Study is based on measured and indicated resources of 51.5 million tonnes as defined by Norwest Corporation in its "Geologic Evaluation and Resources Calculation on the Division Mountain Property, Yukon Territory" dated March 9, 2005 (see Cash Minerals press release dated March 31, 2005).
Norwest notes that the measured and indicated resources included in the study is on less than 5% of the entire property and could be increased substantially with additional drilling. According to the study, approximately 900,000 tonnes of Bituminous "B" coal on an annual basis could be available for sale to the thermal market within the Pacific Rim; an additional 300,000 tonnes could be offered for Pulverized Coal Injection (PCI); and, 175,000 tonnes could be available for sale for a proposed mine mouth 40 MW generating market located on or near the property. The Division Mountain coal displays excellent metallurgical grade properties similar to those of coals sold into India, Japan and South Korea markets. Further tests and ash analysis studies are under way to determine the extent of this potential and could further increase the percentage of PCI/metallurgical coal from Division Mountain.
Norwest Corporation developed preliminary mine plans and a mining cost estimate to exploit the project resources over a 22-year open pit mine life. The study's authors estimated capital costs to develop the mine of CDN$31.9 million, an internal rate of return (IRR) of 59.6 percent and a Net Present Value (NPV) of Cdn$74.8 million.
Economic Results - Base Case
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Category C$ Million
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Startup Capital 31.9
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Replacement Capital 7.0
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Average Annual Revenue 103.8
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Average Annual Cash Costs 69.8
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Average Annual Non-Cash Costs 2.3
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Average Annual Pre Tax Cash Flow 34.0
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Net Present Value - NPV 74.8
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Internal Rate of Return - IRR 59.6%
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This study takes the Company a long step closer to achieving its vision of becoming a producing, energy resource company with excellent near and long-term potential. The potential exists to further expand the volume of sales from Division Mountain to Pacific Rim markets.
Cash Minerals has implemented market studies in Japan and South Korea and has already opened up preliminary talks with potential buyers in India. The port of Skagway is well equipped to handle any excess export capacity.
Clean Coal Analysis
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Wash plant Residual Volatile Fixed Sulphur Calorific
Recovery Moisture Ash Matter Carbon Total Value
% % % % % % cal/g
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60 1.28 10.65 30.98 57.09 0.58 6795
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At this time less than 5% of the property has been fully explored. An enormous potential exists to add significantly to our current and indicated resources over time.
Norwest conducted sensitivity tests on the economic model to determine the impact of changes in coal price, (Power Plant C$45 per tonne ex mine, Export Thermal Coal C$59 F.O.B Skagway, PCI Coal C$130 F.O.B Skagway) transportation costs, total cash mining costs, capital expenditures and port costs. The table below shows the impact of changes in these categories.
Sensitivity Analysis
Cost Category Change NPV $M IRR%
Coal Prices -15% 26.0 33.0
Transportation Cost +25% 53.7 48.7
Mining Costs +25% 51.4% 47.6%
Capital Investment +15% 70.4 52.6
Port Costs +25% 72.3 58.4
Sell Only 15% as PCI Coal -10% 47.0 45.1
Net present value (NPV) was calculated on after-tax cash flows using a 15% discount rate. Operating costs include:
Overburden removal of C$2.00 per M3
Coal Production $1.60/tonne
Coal preparation of $5.15 /tonne
Reclamation costs of $0.15/tonne
Transportation by truck to the port of Skagway C$21.50/tonne
Key factors supporting the development of Cash's Division Mountain project include soaring coal prices and supply shortages, which are widely expected to continue for some time into the future. Further, ongoing growth and development in the Yukon Territory have pushed the local electrical power grid close to capacity and pressure is building to find new generation sources.
The Scoping Study envisions the Division Mountain coal will be shipped out of Skagway, an all season port in Alaska, where a bulk storage and loading facility already exists. Shipping coal from this facility to South Korea and Japan saves two and one half sailing days compared with traditional west coast ports. |
