Cline Mining (CMK-T) is swinging its New Elk metallurgical coal mine in southern Colorado into full commercial production at a rate of 3 million tons a year as part of its initial 20-year mine plan.
New Elk is expected to achieve the annual 3-million-ton rate for the first half of 2012, but due to regulatory delays will produce a total of 2.5 million tons of saleable coal for the calendar year. But starting next year it should churn out 3 million tons a year.
That full production is expected to come from the Allen, Blue and Maxwell coal seams. The Toronto-based company says it should receive regulatory approvals to mine the Blue seam soon. Once it has that in hand it will construct the first 7-entry room and pillar mining layout in the seam.
By April, Cline anticipates having ten continuous mining units between the Allen and Blue seams.
Production at the end of last December is expected to total 30,000 tons of saleable coal. This is a result of Cline only mining the Apache seam and focusing on developing and preparing the other seams for production.
The 191-sq.-km property hosts four main coal seams which contain low-sulfur, high-volatile, metallurgical bituminous coal. Measured and indicated resources in the seams stand at 388.5 million tons.
Located in the western part of Las Animas County, the project is in an area that is no stranger to coal mining. The regional area has seen coal production for more than 150 years.
Formerly known as the Allen mine, New Elk began operating in 1951. But underground mining stopped in the 1980s, while the preparation plant closed in the early 2000s.
New Elk had four owners before Cline picked it up in 2008 for US$15.4 million, and put it into production in December 2010.
A preliminary economic assessment conducted last year shows the 20-year mine plan before taxes has a net present value of US$1.4 billion at a 10% discount rate and a 98% internal rate of return. Payback is estimated at 1.7 years.
During 2011, Cline also drilled 12 exploration holes in addition to the 16 it completed in 2010 for an engineering report and feasibility study, which are expected to be delivered during the first half of 2012.
On the day the company announced that it will kick off commercial production at New Elk, it shares jumped 11% to close Dec. 30 at $1.61 on 3.5 million shares traded.
Today, during late afternoon Cline’s shares are trading up 7% at $1.73.
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