Optimisation Study Reduces Development Capital on Vista
Alberta, Oct 26, 2012 AEST (ABN Newswire) - Coalspur Mines Limited (
ASX:CPL) (TSE:CPT) is pleased to announce the results of an optimization study (the "Study") which has resulted in a significant decrease to the capital required to bring its flagship Vista Coal Project ("Vista") into production.
Highlights:
- Development capital to achieve first production in 2015 reduced to C$527 million (C$343 million lower than the Vista Feasibility Study)
- Potential further reduction of up to C$82 million by leasing/contracting mobile equipment, taking development capital to approximately C$445 million
- Total net funding to achieve full 12.0 Mtpa production capacity of C$841 million with project cashflows substantially contributing to expansion funding
- Development capital expected to be funded either by a strategic partner or a combination of a strategic partner and an off-take arrangement
- Development plan maintains integrity of the current regulatory process
The Study focused on the mining schedule, the timing of equipment purchases, and a phased approach to construct the processing and clean coal facilities to better align with the ramp up profile of Vista. The Study has shown that the scheduling of Vista can be optimised such that the original Phase 1 plan for 5.0 million tonnes per annum ("Mtpa") can be developed in two discrete stages. The new development schedule entails a first stage that will provide for 3.0 Mtpa of clean coal production with the second stage providing for a further 2.0 Mtpa production. Phase 2 will add an additional 7.0 Mtpa, taking Vista to its ultimate design capacity of 12.0 Mtpa of clean coal production. The ramp-up to full capacity will now be over five years as opposed to four years as contemplated in the Feasibility Study.
The staged approach to Phase 1 is essentially a development scheduling change and ensures that there is no impact on the regulatory applications that were filed earlier this year and that the timeline to first production remains intact. Furthermore, this approach allows for the majority of expansion capital to be substantially funded through free cash flow from Vista and reduces the estimated total net funding to reach full 12.0 Mtpa to C$841 million.
Commenting on the Study, President and CEO, Gill Winckler said "We are very pleased with the results of the Study as it significantly reduces the capital expenditure required to bring Vista into production and provides us with optionality for future development phases. Furthermore, all the work done on the Phase 1 regulatory applications and the detailed engineering remains valid and our timeline to first production remains intact, as does our maximum clean coal production rate. The slower schedule will enable us to better manage the social and economic impacts of Vista in the Hinton region and give us more time to work with the community and key stakeholders."
Enhanced Mining Schedule
The Study was completed by CWA Engineering Inc., Golder Associates (Marston), and an experienced owner's group. The parties evaluated the mining schedule and the timing of equipment purchases to find areas of optimization. The Study concluded that through utilizing equipment and infrastructure components suitable for smaller mining operations in the earlier phases and then building additional components as necessary in later phases, significant amounts of development capital could be deferred. This design methodology differs from the approach outlined in the Feasibility Study where the majority of the raw and clean coal handling infrastructure was constructed in the first phase.
The detailed design engineering work on Vista is continuing and now incorporates the optimized development schedule. The revised ramp up profile is depicted below, based on the Company commencing construction on Vista during the first half of 2013.
Capital Costs
The enhanced schedule provides for an optimized capital expenditure profile which defers selected capital items into later phases, resulting in a significant decrease in the funding required to develop Vista in the early production years. Expansion capital required to develop the second stage of Phase 1 and Phase 2 of Vista will be substantially funded through free cash flows. The table below shows the revised infrastructure development capital, excluding mining equipment.
The capital required to purchase the mining equipment to reach full production is estimated to be approximately C$524 million, as shown in link below.
On the assumption that Coalspur purchases all infrastructure and mining equipment capital for Vista, the net funding requirements to reach full production of 12.0 Mtpa are reduced to approximately C$841 million (C$53 million lower than estimated in the Vista Feasibility Study).
As part of the ongoing detailed engineering for Vista the Company has been evaluating capital reduction opportunities which include sourcing equipment and materials outside of North America and contracting / leasing the mobile equipment fleet. The Company estimates that if a mining contractor is utilized the savings in the first stage of Phase 1 would be approximately C$82 million which would reduce the capital required to first production to approximately C$445 million. Similar savings would be possible in the second stage of Phase 1 and Phase 2.
The decision to utilize a mining contractor will be made over the coming months as the Company works on further optimization initiatives and finalizes its funding strategy for Vista.
Operating Costs
The optimized development schedule results in a slight increase in operating costs over the life of the mine. The average mine gate operating costs are C$59.86/t over the first five years of production and C$62.21/t over the first 10 years. As compared to the previous mine schedule, operating costs increased by C$0.50/t over the first five years of production and C$1.03/t over the first 10 years.
Development Plan and Regulatory Requirements
The revised mine plan from will not require any modification to the regulatory application and process that is underway on Vista. The updated production schedule complies with the terms of the mine license and other applications that the Company has submitted. These applications are well underway and approvals for a 5.0 Mtpa development are anticipated towards the end of the first quarter of 2013. Coalspur has also initiated the technical and environmental studies required to support the regulatory applications for the remaining 7.0 Mtpa of production capacity for Vista to reach 12.0 Mtpa. Coalspur expects to complete these studies and file the necessary additional applications in the second half of 2013.
To view all tables and figures, please visit:
http://media.abnnewswire.net/media/en/docs/ASX-CPL-610146.pdf
About Coalspur Mines Limited
Coalspur Mines Limited (ASX:CPL) (TSE:CPT) is a coal development company with approximately 55,000 hectares of coal leases located within the Hinton region of Alberta, Canada. Coalspur's flagship project is Vista, which covers approximately 10,000 hectares and provides a large scale, surface mineable, thermal coal development. Vista is located adjacent to CN Rail's main line, which is suitable for the transport of coal to deepwater ports on Canada's west coast. Coalspur has secured a port allocation agreement with Ridley Terminals Inc., which is essential to the logistics supply chain necessary to export coal from Vista to the growing demand from the Asia Pacific countries.
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