The drop in the Canadian dollar is good news for Fortune Minerals’ (FT-T, FTMDF-O) Lost Fox deposit at its Mount Klappan anthracite coal project, located 330 km northeast of Prince Rupert, B. C.
In a newly updated feasibility study, the weakened loonie meant that the pretax base-case net present value for Lost Fox has risen to $1.28 billion from $702.7 million, using an 8% discount rate.
Meanwhile the pretax internal rate of return has risen to 40.9% from 28.9%, and projected cash costs have dropped to US$88.64 per tonne ($106.79) from US$103 per tonne.
Fortune updated the Mount Klappan feasibility, released last summer, to address the change in currencies. The update focuses on Lost Fox, one of four deposits within the project, and evaluates an open-pit coal mine that would produce 3 million tonnes of clean coal products per year over at least 20 years.
In the update, the company used an exchange rate of US83¢, down from US97¢ used in the summer 2008 feasibility study. Fortune first completed a feasibility study on Mount Klappan in 2005. At that time, the company used a long-term exchange rate of US80¢.
While the project’s returns rose, so did capital costs for the first three years of the project, now projected at $655 million, up from $617 million, as a result of equipment being purchased in U. S. currency.
The economic analysis uses a price of US$175 per tonne for premium pulverized coal injection (PCI) products over the first five years dropping to US$150 per tonne for the remaining 15 years at an exchange rate of US83¢.
The study verified the economics of 102 million tonnes of run-of- mine coal reserves and the production of 60 million tonnes of PCI coal.
Fortune says PCI is the most important new market for anthracite coal — hard coal with the highest rank, carbon and energy content, combined with the low- est moisture and volatile content of all coals. Only about 1% of all coals are anthracite-grade, the preferred fuel for new “clean coal” technologies.
Fortune is currently working on an environmental assessment and mine permitting, as well as looking into the potential of producing higher-value products and power generation to enhance the economics.
The PCI product would be transported by truck from the site to an upgraded port facility in Stewart, B. C., 150 km southwest, and from there, sent on to overseas steelmakers.
Fortune is still looking for a strategic partner and other ways of financing the project. The company has had CIBC World Markets helping it find a way to do so since last summer.
Meanwhile, Fortune has been working on its NICO cobalt-gold- bismuth-copper project, located 160 km northwest of Yellowknife, N. W. T.
The company has completed a feasibility study on NICO that looks at underground and open-pit mining, and has completed its second $10-million underground bulk-sampling program. Fortune is currently moving the mill and surface facilities of the Golden Giant mine in Hemlo, Ont., to the NICO site. The company expects the refurbished Golden Giant assets will reduce NICO’s mine development costs.
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