November 13, 2018 - Publically traded Colonial Coal has announced the outcomes of a preliminary economic assessment (PEA) for a new coking coal mine, near Tumbler Ridge, in north-eastern British Columbia, Canada.

Although preliminary in nature, the PEA shows that the Gordon Creek project has positive economics and that it is worthy of continuing exploration and development, the TSX-V-listed company reported on Monday.

The study is based on a conceptual mine plan that targets 111.6 million tonnes of run-of-mine resource, with a yield of 57.4 million tonnes of coal over a mine life of 30 years. In full production, the mine will produce between 1.6 million tonnes a year to 2.6 million tonnes a year, averaging 1.9 million tonnes a year.

At a capital cost of $300 million for an underground mine, the Gordon Creek project will repay the initial capital investment in three years, Colonial stated.

The PEA delivered a net present value of $690.5-million, using a 7.5% discount rate, and an internal rate of return (IRR) of 24.4%, based on a weighted average coking coal price of $164.8/t and a premium pulverized coal injection coal price of $140.5/t.

Financial analysis suggests that the “break-even” coal price is less than $91.1/t, $96.5/t and $103.3/t for discount rates of 5%, 7.5% and 10%, respectively. It also indicates that for a 15% IRR, a minimum coal price of $119.9/t will be required.

The study calculated the overall weighted average price for all coal types at Gordon Creek to be $160.5/t.

The PEA assumed that the Gordon Creek project would be connected by road to the existing rail line south of Tumbler Ridge. The rail line would be accessed through a loadout located in the area of an existing coal loadout operated by Peace River Coal.