Cline moves toward production at New Elk coal mine

With a coal preparation plant, silos and mining equipment now in its hands, Cline Mining (CMKT, CLNMF-O) is one step closer to bringing the New Elk mine in Colorado back into production.

The New Elk surface assets, which also include buildings, railway right of way, real estate, conveyor systems, electrics and a coal waste dump, cost Cline US$1.6 million, plus the assumption of an existing reclamation bond from the state government for US$967,000.

An agreement signed last November also entitled Cline to acquire a total of 74 sq. km that make up the New Elk coal properties and a resource of 315 million tons of in-place coal. The resource has been verified in a recently published National Instrument 43-101 technical report.

The price tag for the rest of the acquisition was US$13.8 million, plus an existing US$2.8-million reclamation bond and a US$1-per-ton royalty on coal sales that Cline has the right to buy out for US$15 million.

The company says it hopes to start production “as soon as possible” at the plant, which operates at 550 tons per hour.

But first the company will need to complete a financing, which is currently being arranged.

The New Elk mine first opened in 1951 to provide metallurgical coking coal for the blast iron furnace of a steel company. In 1981, the plant was converted to direct electrolytic reduction steel, eliminating the need for coking coal.

The mine was sold but continued operations until 1989 though the coal preparation plant, built in 1984, was used until 1996.

On the news, Cline shares gained 23%, or 10, to 54 on a trading volume of 4.3 million shares.