The Lochinvar Coking Coal Project is located on the Scottish / English border and is the Company’s principal focus. The project comprises two adjacent exploration and conditional underground mining licences known as Lochinvar (67.5 km²), and Lochinvar South (51km²).
These licenses cover a shallow portion of the Canonbie Coalfield, an undeveloped coking coal resource located adjacent to the West Coast Main Line rail connecting with UK steelmakers, coke makers and export ports.
NAE drilled an initial four drill holes at Lochinvar in 2013 and a further 6 holes in 2014.
Historic exploration at Lochinvar was conducted in the 1950’s by the National Coal Board, which sank four boreholes. This work proved the existence of the same sequence of thick coals of the Middle Coal Measures, which had been previously mined at Rowanburn colliery to the east of the licence where operations ceased in 1922.
From 1979 the NCB drilled a further nine boreholes and shot 55 kilometres of seismic line which proved the existence of a large concealed coking coalfield (the Canonbie Coalfield). The geological and mining potential of the coalfield was summarised by G.S. Picken, coal geologist with the British Coal Corporation in his 1988 paper “The concealed coalfield at Canonbie: an interpretation based on boreholes and seismic surveys”.
Scoping Study Results
In October 2014, NAE completed the Lochinvar Scoping Study which confirmed the potential for a low cost long life 1.9Mtpa long wall mining project to deliver 1.4Mpta coking coal into UK and European markets.
The Scoping Study delivered a robust set of economics highlighted by an NPV9 of US$263M with and IRR of 20% and a payback of 4.9 years.
The project is focused on an underground mine connected by a drift (decline) to the surface where coal will be processed and loaded into rail wagons for direct delivery to either UK steel mills or port facilities in the UK for shipping into Europe. Underground coal will be mined using a 200m wide longwall with development roadways constructed by 3 continuous miner/ bolters.
Based on the production schedule over the life of mine, a total of 47.3 Mt ROM coal will be produced, averaging 1.9 Mtpa ROM coal with a peak production of 3.1 Mtpa ROM coal in year 16. The ROM coal will be processed at a high 71% yield to produce 33.7 Mt of clean coal (saleable product), averaging 1.4 Mtpa clean coal.
These results demonstrate the potential for Lochinvar to deliver excellent returns on investment with lowest quartile operating costs and a low capital cost structure.
|LOM Saleable Coal||Mt||34|
|Life of Mine||Years||26|
|Annual Ave. ROM||Mt||1.9|
|Annual Ave. Saleable Coal||Mt||1.4|
|Revenue||Benchmark HCC Price||US$/t||165|
|Ave. Realised Price||US$/t||143|
|Operating Costs||Unit Operating Cost||US$/t||70|
|Capital Costs||Construction Capital||US$ M||284|
|Life of Mine Capital||US$ M||593|
|Cash||Annual Cash||US$ M pa||75|
|Valuation1F1||NPV (@9%)||US$ M||263|
Summary Economic Results – Lochinvar Scoping Study
A total resource of 111 Mt comprising 49 Mt Indicated Resource and 62 Mt Inferred Resource has been defined for the Nine Foot and Six Foot Seams. The Indicated Resource, Inferred Resource and Exploration Target have been reported in accordance with the JORC Code (2012) and have been independently estimated by Palaris Australia Pty Ltd, an internationally recognised mining consultancy specialising in coal exploration and mining. The resource estimate is based on 9 holes drilled by the National Coal Board (NCB) from 1979 through to 1983 and 10 holes drilled by NAE in 2013 and 2014.
(Air Dried Basis)
|Nine Foot Seam||37||49||86|
|Six Foot Seam||13||13||26|
Lochinvar Resource Statement (August 2014)
An additional Exploration Target of 31 – 64Mt has also been identified which includes both the Lochinvar and Lochinvar South Leases.
Geological data collected from the two phases of NAE drilling and a re-interpretation of the available seismic data has increased the understanding of the Lochinvar structure. Palaris completed a revised structural interpretation in August 2014 which identified an increased density of faulting compared to the previous interpretation. Mine plans in the Scoping Study will be based on this revised structural interpretation.
This Resource occurs between 200m and 1,000m depth with 95 Mt of the total resource, including 74 Mt from the Nine Foot Seam, being shallower than 800m depth. All of the Indicated Resource is shallower than 800m depth.
Average seam thickness is 2.2m for the Nine Foot Seam and 1.8m for the Six Foot Seam.
An indicative Lochinvar Coal product quality has been determined based on coal quality results from Phase 1b and previous drilling as shown below.
|Lochinvar Target Specification|
|Inherent Moisture (%)||3.0|
|Volatile Matter (%)||34.0|
|Fixed Carbon (%)||59.2|
|Total Sulphur (%)||1.2 – 1.4|
|Gray – King Coke Type||G6|
|Gross Calorific Value (Kcal/kg)||7,775|
|Vitrinite Content (%)||70|
|Vitrinite Reflectance RoMax (%)||0.84|
|Max Fluidity (ddpm)||100 – 11,000|
Indicative Lochinvar Coal Product Quality
These results confirm the potential for Lochinvar to produce a low ash high volatile coking coal product at a high yield that will be attractive to the UK and European steel industry and provide a strong platform for the completion of the Lochinvar Scoping Study.
Lochinvar is well positioned to become the UK’s first major new underground coking coal project in over 30 years. It is a unique position to deliver a high quality coking coal at very competitive price because of;
- Proximity to main West Coast Railway which links directly to Steel mills in UK and ports to access European market
- Lower labour rates when compared to Australian mining costs
- Excellent fiscal regime with low corporate taxes and royalties
- Strong coking coal market demand in UK and Europe.
- Domestic coke and steel makers (4.8Mt coking coal imports in 2012)
- Export ports proximal to markets in Western Europe (22.9Mt coking coal imports in 2012).
Lochinvar Infrastructure and Potential Markets
Due to low coking coal prices, NAE made the decision During 2015 to curtail activities on the Lochinvar project until market conditions improve sufficiently. The company is maintaining all licenses in good standing and maintaining a community program on site. The company remains confident that Lochinvar can be developed into a significant producer of coking coal into the UK and European markets when market conditions improve sufficiently and Lochinvar is well positioned to take advantage of the next market upturn.
A detailed work program has been developed for the Lochinvar project which will take 3 years to the commencement of coal production from the time the project is funded and exploration and studies can be re-started. The next phase of the work program will focus on reducing key identified project risks. Importantly this will include seismic surveys and infill drilling to increase the resource confidence and deliver a Reserve to support a pre-feasibility study.