PERTH (miningweekly.com) – A prefeasibility study (PFS) into the Stage 1 development of the Telkwa metallurgical coal project, in British Columbia, has confirmed that the project can be developed into a small standalone operation.

The PFS found that some 250 000 t/y of saleable coal can be produced over a 19-year mine life, delivering average earnings before interest, taxes, depreciation and amortisation of A$18-million a year.

The Stage 1 development was estimated to have a pre-tax net present value of $51-million and an internal rate of return of 32%, ASX-listed Allegiance Coal reported on Monday.

The project was estimated to have an average life-of-mine all-in free-on-board cash cost before tax of $54/t, with the project expected to require a capital investment of only $35-million.

“It truly is a remarkable achievement that a bulk commodity mining operation can be so low down the cost curve without the benefit of scale and volumes to drive unit costs down,” said Allegiance nonexecutive director Malcolm Carson.

“It is rare for key cost drivers such as simple geology, exceptionally low strip ratio, good yield and excellent logistics to align in this way and deliver a coal project that can generate strong returns without scale and without the burden of major upfront capital.”

Allegiance previously completed a PFS into a staged development of the Telkwa operation, which saw the Stage 1 development produce at a rate of 250 000 t/y, ramping up to 1.75-million tonnes a year for Stage 2, after four years of operation.

The original PFS estimated a capital investment of $51-million for the Stage 1 development, with Stage 2 to require a further A$162-million investment, with capital cost reductions expected on the back of a manufacturer-funded and operated wash plant and with either contract mining or equipment leasing.

Allegiance said that the company’s primary focus would be on accelerating towards permitting for the Stage 1 production, with the company aiming to complete all baseline studies by the first half of 2018, and lodging applications for permits to operate the Stage 1 mine by the fourth quarter of 2018.