Coal at Division Mountain looks economic for Cash Minerals

An updated study demonstrates that its Division Mountain coal property in the Yukon is economically viable for Cash Minerals (CHX-V).

Cash Minerals, a Toronto-based energy company that is focused on uranium and coal exploration, says it commissioned the study in July to re-evaluate earlier economic studies, given improvements in the markets for exported coal.

The National Instrument 43-101 compliant pre-feasibility study was undertaken by Norwest Corp., a leading North American energy and mining engineering consulting group. It found that the Division Mountain coal property has estimated measured mineral resources of 52.5 million tonnes of high volatile bituminous B coal, including 26.4 million tonnes of proven mineral reserves.

The updated study suggests that about 2 million metric tonnes per year of raw coal could be mined and washed to produce a 14% ash product for the thermal export coal markets on the Pacific Rim.

Those numbers result in a 58.3% yield and average sales of about 1.24 million tonnes of thermal coal per year over a decade. In addition, the study proposed that about 240,000 metric tonnes of run-of-mine coal per year would fuel a 50 megawatt “mine-mouth” generating station.

The Division Mountain coal deposit is 90 km north-northwest of

Whitehorse in Canada’s Yukon Territory, and is 290 km from a year-round tidewater port at Skagway in Alaska.

The study is based on coal being mined from an open pit using conventional truck and shovel operations. A raw coal product would be produced, including a run-of-mine product that would be sold as fuel for a local 50 megawatt (net) generating station. The coal will be washed to produce an export grade coal.

A clean-coal ash content of 14% is recommended for the export thermal coal markets, which would result in more efficient coal washing and improved yields than the PCI coal, and increase revenues.

Cash Minerals maintains that the project would be economic and generate an average pre-tax cash flow of $19.1 million per year, a net present value of $11 million using a 5% discount rate, and an internal rate of return of 9.2%.

The economics would be better if it can improve the wash yields to 6.1% (from 14%). In that case, Division Mountain would generate average pre-tax cash flow of $26.2 million, a net present value of $50.4 million using a 5% discount rate, and an internal rate of return of about 22.4%.

A payback period of less than six years is estimated for initial

capital expenditures of $110 million under the first scenario, with   payback of less than four years for the second scenario.

Of the $110 million, $48.5 million will be required for mine development, infrastructure and facilities, and $61.3 million for equipment.

The next step for Cash Minerals is to plan a drill program to perform additional hydro-geological and geotechnical testing and analysis, which will better delineate the deposit.

Most of the exploration area lies within five coal leases, which grants mining rights for a renewable 21-year term. The remaining area lies within an area covered by an additional 22 territorial coal exploration licences, which cover about 360,000 hectares of coal-bearing stratigraphy in the Division Mountain area. The licences are

held under renewable, three-year terms.

Cash Minerals is currently trading at about 4.5¢ a share and has a 52-week trading range of 3¢-65¢ per share. The company has 117.24 million shares outstanding.