Name and Location
Buck Creek No 1 coal project, Illinois, US.

Client
Paringa Resources.

Project Description
A prefeasibility study (PFS) completed on the Buck Creek property has confirmed the technical viability and robust economics of the project in the Illinois coal basin.

Compared with results of the scoping study released in February 2014, the PFS results show an improvement in average product yield, leading to increased saleable production and sales revenues.

The project has an initial marketable ore reserve estimate of 62.6-million tons of coal, which can support production of 5.2-million tons a year of run-of-mine (RoM) coal yielding an estimated 3.8-million tons a year of saleable clean coal at steady-state production.

Access to the mine will be provided by a slope for the transport of personnel, materials, and RoM coal, and a two-compartment vertical shaft will provide mine ventilation. The mine slope (decline entryway from the surface to the coal seam) will accommodate a conveyor belt to transport RoM coal to the surface and a travelway for the transportation of personnel, supplies and equipment.

Production will be through room-and-pillar mining using four supersection units and eight continuous miners. Each supersection will be equipped with four battery haulers discharging onto a belt feeder/breaker, which provides surge capacity to reduce hauler dump time.

Further, each supersection will be equipped with two dual-head roof-bolting machines to provide roof support in mined entries. The supersections will also require scoops for the cleanup of spillage, the distribution of supplies and materials, and other utility purposes.

Personnel and supplies will be transported from the surface, down the slope and to the mine’s working sections using battery- or diesel-powered rubber-tyred equipment. Supplies will generally be loaded in trailers on the surface and transported to the operating sections or areas designated for material use. Rehandling and stockpiling supplies underground (in areas other than active working sections) will be minimised to reduce labour and damage to supplies.

The PFS mine plan includes a total production of 86.2-million raw RoM tons and 63.4-million clean, marketable tons over an 18-year period.

At planned productivity, each supersection will produce an estimated 2 300 t to 2 400 t of RoM coal per shift. RoM production for the project will total about 5.2-million tons a year at full production.

The mine portal, coal preparation plant, and refuse disposal facility will be located in McLean County in the east-central portion of the property. An overland conveyor will connect the mine and plant to a barge load-out on the Green river.

The project will include a modern, fully integrated, coal-handling and preparation plant (CHPP) to provide a consistent product, which meets customer specifications. At full production, the CHPP will be capable of processing 5.2-million tons of RoM coal a year, which equates to about 3.8-million marketable tons a year. The plant will be scheduled for operation 302 days each year, which represents an average six-day-a-week work schedule for 52 weeks, excluding ten holidays.

The company currently has a fully permitted barge load-out facility, which will consist of a ground-based tower connected to a floating work barge through a 121.9-cm-wide, 413-cm-long, loading conveyor. The tower will stand about 13.72 m above the river and 27.4 m away from the river bank, with a 9.1-m-wide by 36.6-m-long work barge anchored on piers situated 91 m from the river bank. The system will have a design capacity of 2 500 t/h.

Net Present Value/Internal Rate of Return
The project has a net present value at an 8% discount rate of $267.4-million and an internal rate of return of 26%.

Value
The increase to the initial capital cost of the project in the PFS of $127-million, compared with the $108-million cost in the scoping study, is because of the additional capital cost incurred from the redesign of the CHPP, following the results of the optimisation study. The results of the optimisation study released in March to redesign the CHPP to produce a washed and blended coal product led to a substantial improvement in the project’s fundamentals.

Duration
Construction at the project is expected in the first quarter of 2016, with initial production planned for the first quarter of 2018.

Latest Developments
Paringa will raise about A$5.1-million through a share placement to strengthen its balance sheet as it starts formal debt financing discussions for its Buck Creek No 1 mine.

The company will place an estimated 15-million shares, priced at A$0.34 each, to raise the funds. The placement is cornerstoned by Baobab Asset Management, which has extensive experience in the small resource sector, and will provide support to Paringa going forward.

“We have a very active year ahead and securing these high-quality US institutional investors is a very positive step for the company, which underlines the Buck Creek No 1 mine’s scale and potential to become one of the next strategic sources of premium coal in the US,” Paringa president and CEO David Gay has said.

The issue price represents a 6.3% discount to the 30-day volume weighted average price of Paringa shares.

In addition, the company will issue 7.5-million free attaching options, on a one-for-two basis, exercisable at A$0.50 each by the end of July 2018.

Key Contracts and Suppliers
None stated.

On Budget and on Time?
Not stated.

Contact Details for Project Information
Paringa Resources, tel +61 8 9322 6322, fax +61 8 9322 6558 or email admin@paringaresources.com.