Telkwa Metallurgical Coal Project

Project Background

The Project sits in the Telkwa Coalfield, located within the southern reaches of the Bowser Basin, which also hosts Atrum Coal NL’s (ASX:ATU) Groundhog project ~300km to the north.


Figure 1:  Telkwa Project Location (Source: Ministry of Energy and Mines British Columbia Coal Overview 2015)

The Project is located immediately adjacent to Canadian National Rail’s (CNR) mainline that runs direct to the deepwater Port of Prince Rupert. It is a relatively short 390km rail haul from the Project’s planned siding direct to Ridley Island Coal Terminal (RICT), located at Prince Rupert. RICT states that it currently has 18Mtpa installed and operating capacity that can be expanded to 25Mtpa within 24 months.

The Directors believe current annual coal exports from RICT are around 3.5Mtpa which means there is more than sufficient port capacity for the foreseeable future.

Historical reports indicate coal mining commenced in the Telkwa area in the 1920s and continued up until the early 1970s supporting domestic industrial demand. In addition, the Project area has been explored extensively from the 1950s to the end of the 1990s. Exploration included 828 drill holes, of which 321 were cored for coal sampling and analysis, along with two major bulk samples and extensive trenching.

The Project was the subject of a feasibility study completed in 1996 (1996 Feasibility Study) and an environmental impact assessment in 1997, designed to support a mining permit application for a 1.5Mtpa clean PCI/thermal open pit coal mine. At the time, PCI and thermal coal prices did not support the capital investment to build a mine and since then, the Project has stood dormant.

Coal Resource and Coal Quality

TCL commissioned a Canadian National Instrument 43-101 JORC Compliant Technical Report in February 2015 (Report), which confirmed that of a 165Mt coal Resource, 89Mt was in the Measured Resource category, as defined by the JORC Code. The Project includes three open pit areas all within close proximity. The coal resource is summarized in the following table.

Pit Areas  Measured  Indicated  Inferred  TOTAL
 Tenas  40,329,000  0  0  40,329,000
 Goathorn  35,505,000  26,394,000  27,067,000  88,966,000
 Telkwa North  13,279,000  15,643,000  6,345,000  35,267,000
TOTAL  89,113,000  42,037,000  33,412,000  165,562,000

TCL also commissioned a report to assess coal quality and coal market options in July 2015. Results of that report position Telkwa coal as a semi-soft coking coal competing alongside Queensland and New South Wales semi-soft coking coals as summarized below.

Air Dried Telkwa
Low Ash Product
Telkwa
High Ash Product
NSW
SSCC
QLD
SSCC
% Moisture 1.12 1.12 7-11 9-10
% VM 24.6 24.6 33-37 25-26
% Ash 7.4 10.4 6.5-10.5 9-10
% Sulphur 0.90 1.20 0.45-1.05  0.50-0.55 
% FC 66.9 63.9 50-60  64-66 
FSI 3-5 1-3 3-6  3-4 
Max Fluidity 2-17 2-17 100-500  15-50 
Rank 0.88 0.79 0.80  1.05 
CSR 41-47 32-38 25-30  32-35 

Summary of Project Information

The Telkwa Coalfield developed along the northern flank of the Skeena Arch near the southern limit of sedimentary rocks in the Bowser Basin. More than 500m of coal-bearing strata, referred to as the Lower Cretaceous Skeena Group are present in this area. The Tenas area includes up to 13 coal seams with a cumulative coal thickness of 11.6m over an interval of about 55m. In the Goathorn and Telkwa North areas there are up to 17 coal seams with an average cumulative thickness of 20.5m over an interval of 85 m. The deposit type for the Tenas area is described in the Report as “Moderate”, and for the Telklwa North and Goathorn areas, as “Complex”.

A total of 828 holes have been drilled from 1979 to 1998, of which 507 were rotary and 321 were core. Coal samples were gathered from all coal seam intersections recovered from core drilling, and two bulk samples (219 ton in 1983 and 80 ton in 1996). Coal samples were sent to several laboratories for testing and analysis during this period. Analytical testing included individual seam analysis, product testing, complete washability analysis, and burn tests.

The Coal Resource estimate was prepared in accordance with the requirements of the Canadian National Instrument (NI) 43-101 and the CIM Definition Standards. NI 43-101 is the Canadian equivalent of the JORC Standard. The mineral resources are classified as to the assurance of their existence into one of three JORC equivalent categories, Measured, Indicated and Inferred. The Resource is reported as in-place tonnage down to a maximum strip ratio of 20:1 BCM/ROMt, which is the limit typically applied to coal in British Columbia. The Resource is not adjusted for mining losses or recovery, but does take into account a minimum mineable seam thickness and maximum included parting thickness.

The 1996 Feasibility Study contemplated the Resource would be progressively mined through three open pits, all within close proximity, and with all raw coal washed by a single coal handling and preparation plant strategically located. The Study also contemplated coal would be conveyed by truck along a 6km designated haul road to a planned rail siding.