Fortune’s world class Mount Klappan
project in northwest British Columbia contains 2.8 billion tonnes of high rank
anthracite coal, making this one of the largest undeveloped deposits of
metallurgical coal in the world. About $86 million of work has been carried out
to develop this asset, including $65 million by Gulf Canada Resources Limited (“Gulf’)
prior to being taken over by ConocoPhillips. Mount Klappan has been assessed in
a positive definitive feasibility study, and more than 200,000 tonnes of coal
was test mined from the Lost Fox and Hobbit Broatch deposits for pilot plant
processing and trial cargos of 100,000 tonnes of finished coal products to
customers in North America, Asia and Europe. Mount Klappan is in the
environmental assessment process for the development of a 3 million tonne per year mine and process
plant and a new short-cut road to the highway and port of Stewart. Fortune is
pursuing a strategy of finding a partner to help develop this very large asset
before taking the project through the next steps of mine permitting. With the
current worldwide shortages of good quality metallurgical coal and increasing
prices, we have an attractive market to accomplish this objective.
3-dimensional model of the proposed Lost Fox mine pit and waste roack dumps.
Pilot plant for the 1985-86 test mining and trial cargo of 100,000 tonnes of clean coal products.
LOCATION AND ACCESS:
Fortune’s coal licenses cover more than
150 square kilometres of lands straddling the B.C. railway right-of-way, 150
kilometres northeast of the port of Stewart and 330 kilometres northeast of the
port of Prince Rupert. Track has been installed on this right-of-way to within
150 kilometres south of the proposed mine and the largely completed road bed
currently provides truck access to the provincial highway system. There are two
principal options to transport coal from Mount Klappan to ocean ports. They
include: upgrade and extension of the railway to provide unit train service to
Prince Rupert; or, construction of a new 100-kilometre short-cut road for truck
haulage of product to Stewart. The engineering and environmental work for this
road has already been largely completed as well as engineering for an upgrade
to the bulk terminal in Stewart.
MINERAL RESOURCES AND RESERVES:
Coal has been identified in more than
30 seams at Mount Klappan to a depth of 300 metres and coal delineated in four
separate resource areas, referred to as Lost Fox, Hobbit-Broatch, Summit and
Nass deposits. Global resources exceed 2.8 billion tonnes of in-situ anthracite
coal, 108 million tonnes of which are classified as Measured, 123 million
tonnes as Indicated, and 2.6 billion tonnes in the Inferred and Speculative
classes. Marston & Marston Inc. (“Marston”) updated the mineral resources
and reserves for the initial open pit in the Lost Fox deposit, which include
approximately 102 million insitu tonnes of coal that can be washed to produce
61 million product tonnes of 10% ash ultra-low volatile PCI coal for use in the
overseas steel industry. Marston also completed a pre-feasibility economic
assessment for a thermal coal option, identifying reserves of 106 million
tonnes.
Lost Fox mine plan for the open pit,waste rock dumps and process plant.
Coal processing in the 1985-86 pilot plant.
The "I" coal seam at Lost Fox was test mined in 1985-86.
FEASIBILITY STUDIES:
Mount Klappan has been assessed in
several positive feasibility studies, which demonstrate attractive rates of return for the project under a
number of development scenarios. The most recent definitive feasibility study was
conducted by Marston in 2008, which assessed an open pit mine, wash plant and
infrastructure to support production of 3 million tonnes of metallurgical coal
over a minimum 20-year mine life. This study contemplates production of a 10%
ash pulverized coal injection (PCI) coal for the steel industry, and potential diversification
into charge carbon, sinter and thermal coal products. Current metallurgical
coal prices are well above the assumptions used in the feasibility study, which
indicates a base case pre-tax internal rate of return of 40.9% and 8%
discounted net present value of more than C$1.28 billion.
B.C.Rail right-of-way and roadbed provides access to the Mount Klappan site.
ANTHRACITE MARKET:
Anthracite is the highest quality coal,
measured by carbon and energy content, and represents only 1% of world coal
reserves. These unique properties make anthracite suitable for use in a broad
range of metallurgical, thermal, water purification and composite material
products. Anthracite is utilized as a premium ultra-low volatile pulverized
coal injection (“PCI”) coal used to manufacture steel because injection favours
the very low volatile content, which could otherwise explode with higher gas
content coals. Injection is a cheaper and more efficient method of making steel
and most steel companies have converted to this process. The steel industry
also consumes anthracite as a blend coal to replace coke, and with pig iron in
sintering plants. Anthracite reductants are used in aluminum and titanium
processing, and as charge carbon in electric-arc steel manufacturing. Carbon
filters for water purification are made from anthracite and it is also used to
make carbon composite materials. Thermal uses for anthracite include smokeless
fuels in space heating, heating and cooking briquettes, and kiln fuels used to
make cement and lime. Approximately 40% of the world's electricity is generated
from coal-fired power plants, many of which are configured to burn anthracite.
The rising cost of oil is also making gasification and coal-to-oil liquefaction
technologies economically attractive whereby coal is used to make synthetic
diesel and jet fuels.World annual production of anthracite is approximately 400
million tonnes, most of which is consumed locally for power generation.
Notably, China produces half of the world’s anthracite supply and has now
become a net importer. Vietnam, the world’s second largest producer, is also
curtailing exports in order to satisfy its own domestic energy requirements.
The global shortage of all metallurgical coals is resulting in supply imbalance
and prices exceeding US$300 per tonne for some premium products and PCI prices
of US$200 per tonne.
Lump coal and filter media
JOINT VENTURE WITH POSCO CANADA
LONDON, ON, July 13, 2011 /CNW/ - Fortune Minerals Limited (TSX: FT) ("Fortune" or the "Company") is pleased to announce that its wholly-owned subsidiary, Fortune Coal Limited. ("Fortune Coal") has entered into a definitive agreement to form a joint venture (the "JV") with POSCO Canada Ltd. ("POSCAN") and its wholly-owned subsidiary, POSCO Klappan Coal Ltd., to advance the Mount Klappan Anthracite Metallurgical Coal Project in northwest British Columbia ("Mount Klappan" or the "Project") to production. POSCAN's parent company, POSCO is based in South Korea and is one of the world's largest steel producers. Pursuant to the agreement, POSCAN will acquire a 20% interest in Mount Klappan, and based on current capital cost estimates, is anticipated to make total payments and cash contributions of $181 million, including $30 million in upfront funding upon closing.
JV Highlights:
* Formation of a JV to be owned 80% by Fortune and 20% by POSCAN to accelerate development of Mount Klappan by combining Fortune's local development and operations expertise and POSCAN's market knowledge and financial backing;
* At closing POSCAN will provide $30 million in upfront funding to Fortune Coal, $20 million of which Fortune Coal will contribute directly to the JV;
* POSCAN will provide funding for 20% of the total development and capital cost of the Project, which under current estimates will equal a total contribution of $154 million to the JV;
* POSCAN will provide $17.2 million in additional payments to Fortune Coal based on future milestones;
* POSCAN will fund 20% of operating costs and receive 20% of the product produced from the Project;-and-
* Fortune will serve as Manager of the JV and will be compensated, on a recovery basis, for providing operational, technical and administrative support over the life of the mine.
View Full Press Release
PERMITTING AND COMMUNITY RELATIONS:
Fortune has been actively
collecting baseline environmental data since 2004 for the Mount Klappan project
and its access corridors. In addition to the work conducted for Fortune, the
project has benefited from studies undertaken in the 1980’s and 1990’s by Gulf.
Studies have included traditional use, archaeology, socio-economics, human health/country
foods, land use, soils, vegetation, wildlife, habitat mapping, hydrogeology,
surface hydrology, water quality, wetlands, fisheries, meteorology and metal
leaching/ acid rock drainage potential. The project is currently in the
environmental assessment process to permit the mine and was recently given
major project status to streamline this process. Fortune Minerals is not
advancing the project, however, until it secures a suitable development
partner. In early 2009, Fortune also completed an environmental assessment
cooperation agreement with the Tahltan Nation. This agreement sets out the
mutual respect of each others interests and the framework for efficient
navigation through the environmental assessment process when it resumes.