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 was expected to achieve the annual 3-million-ton rate in the first half of 2012, but after regulatory delays it will instead produce 2.5 million tons of saleable coal for the calendar year and churn out 3 million tons by next year.
That full production would 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. After earning the approvals, it will build the seam’s first seven-entry room and pillar mining layout.
Cline anticipates having 10 continuous mining units between the Allen and Blue seams by April.
December production is expected to total 30,000 tons of saleable coal as a result of the company 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 containing low-sulphur and high-volatile metallurgical bituminous coal. Measured and indicated resources 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 eighties, while the preparation plant closed in the early 2000s.
New Elk had a few 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 that the 20-year mine plan has a net present value of US$1.4 billion at a 10% discount rate before taxes, and a 98% internal rate of return. Payback should be under two years.
During 2011, Cline drilled 12 exploration holes following 16 completed in 2010 for an engineering report and feasibility study, which should be delivered before June.
It entered a $50-million debt agreement on Dec. 20 to help fund the improvements and expansions on the New Elk mine.
On the day the company announced commercial production at New Elk, its shares jumped 11% to close Dec. 30 at $1.61 on 3.5 million shares traded.
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