On February 10, 2010, Xstrata Coal Canada announced that they intend to move forward with the development of the Donkin Coal Project based on sales into the coking coal market. The revised Donkin Coal Project is expected to utilize four continuous miners added incrementally over the first three years of development. In addition, a coal wash plant will be constructed and it is proposed that coal will be shipped directly from the mine site using a barge to ship transport system.
Erdene holds a 25% interest in the Donkin Coal Alliance (DCA) with partner Xstrata Coal Canada, which holds a 75% interest. The DCA continues to work towards the development of the Donkin Coal resource, specifically the Harbour seam, which contains an indicated resource of 101 million tonnes and an inferred resource of 115 million tonnes classified as high volatile A bituminous, high-sulphur, medium-ash coal with excellent coking coal properties including low phosphorous, high CSN (crucible swell number) and fluidity.
Under the revised development plan, the Donkin Coal Project is projected to produce approximately 2.75 million tonnes per annum of washed export grade coking coal at full production, pending the receipt of all approvals. A pre-feasibility study for the revised Donkin coking coal project is currently underway and expected to be finalized by mid 2010.
The Donkin Coal Project is located on tidewater in Cape Breton, Nova Scotia, Canada. The project is strategically positioned for the transport of the high quality Donkin coal to international seaborne markets including the U.S., Europe and Asia. The project is located on tidewater with a proposed facility on site utilizing a barge to ship bulk loading system.
In April 2007, Erdene received a National Instrument 43-101 compliant resource for the Donkin Coal project from McElroy Bryan Geological Services (“MBGS”). The report identified a 227Mt Indicated and 254Mt Inferred high volatile A bituminous coal with 13,500 to 14,000 BTUs, high sulphur, medium ash and low moisture with excellent coking coal properties including low phosphorous, high CSN (crucible swell number) and fluidity. To view a copy of the resource report click here for the MBGS Report.
In November 2007, the DCA received an independent Preliminary Assessment Study (“PAS”) by Norwest Corporation’s (“Norwest”). The PAS was a study into the business case for a continuous miner development and longwall (“LW”) extraction coal mine at the Donkin project. The PAS’s base case scenario returned a net present value (NPV) for the project of US$194M (or US$49M for Erdene’s 25% interest) using a coal price of US$52/tonne. The proposed mine has a projected life of 30-plus years, producing approximately 108 million tonnes of run-of-mine coal. The initial target market for this product will be domestic and export thermal coal for power generation. To view a copy of the PAS report click here.
The Norwest PAS should be considered preliminary in nature based on the inclusion of inferred resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. Until there is additional information to upgrade the inferred resources to a higher category, there can be no certainty that the preliminary assessment will be realized.
With the announcement by Xstrata Coal in February 2010 to focus on the coking coal market and to revise the development plan to a continuous miner system, wash plant and barge to ship loading facility, a pre-feasibility study is now underway. The report is expected to be finalized by mid 2010.
On October 29, 2008 an Environmental Assessment report for the Program was registered with the Province of Nova Scotia’s Environment Department. On December 18, 2008 the Minister of Environment released a decision approving the undertaking in accordance with Section 13(1)b of the Environmental Assessment Regulations, pursuant to Part IV of the Environment Act. The undertaking has been approved subject to a number of conditions. All of the related project documents can be viewed on the Nova Scotia Department of the Environment’s website by clicking here.
The plan to focus on coking coal markets, announced in February 2010, will require modifications to the Nova Scotia Environmental Assessment reports and will require a Federal Environmental Assessment report for approval of the barge to ship transport system. Work on these approvals in underway.
