Mountaineer Mining Company Rum Creek Surface Mine MinE 484: Senior Mine Design Lucas O Neal O and Samantha Stahle April 28, 2006 modified for web display
Executive Summary Project Consists of: 4570 acres 8 Bituminous Coal seams 163 Employees at Full Production 17 Years of Mining Total Operating Cost $13.60/ton @ Full Production. $136 million in capital to achieve full production. IRR 47.1% Net Present Value discounted @ 7% - $348 million
Introduction Surface Coal Mine 8 Bituminous Coal Seams, Appalachian Coal Basin Southern WV near Argyle, Yolyn, and Braeholm, WV. Annual Production: Raw Coal Production ~ 4.6 mm tons Clean Coal Product ~ 1.7 mm tons Raw Direct Ship Product ~ 1.8 mm tons Sold to Coal Fired Steam Power Plants Project Life is 19 years with 17 years of surface mining on the property.
Location Located Southeast of Logan, WV 4,570 acre Property Located within 100 miles of: Huntington, Beckley, Princeton and Bluefield Rum Creek Surface Mine
2140 9332 SURFACE ELEV: 2137.51 2120 Geology 2100 2080 2060 LEGEND UFB Roof 8 Coal Seams Upper Five Block, Lower Five Block, Upper Stockton Rider, Stockton, Lower Stockton Rider, Coalburg Rider, Coalburg, Lower Coalburg Some seams are not present or converge with others in some areas. Geologic Formation Allegheny & Kanawha Formation Flat to gently folded strata Northwestern Dip of 1.5 2040 2020 2000 1980 1960 1940 1920 1900 1880 1860 1840 1820 1800 LFB Roof USR Roof STCK Roof LSR/CR Roof CBRGRoof CBRGFloor LFB USR STCK LSR CR 1780 Typical Geologic Column 1760 1740 1720 1700 1680 CBRG DEPTH: 448.25
935 X X BM1040 9302 9301 Reserves 9303 8714A Classified by USGS system of Measured, Indicated, and Inferred Reserves. R Measured STCK 4,155,087 9331 tons (91%) 9044 8712 798 656 9305 653 CBRG 11,578,364 tons (91%) 8611 LCBRG 7,414,153 tons (78%) 9036 Not Present in all drillholes, assumed to converge with CBRG seam. Indicated STCK 410,943 tons (9%) CBRG 1,145,113 tons (9%) Measured Indicated ~ 91% LCBRG 2,091,172 tons (22%) 9% 9304 Inferred 0 tons Indicated 868 Measured ~ 9% Drillhole data for the property is adequate, but additional 835A drilling ling must take place to further evaluate the reserves. 8613 Information was completed before additional drillholes were completed. Reserve Classification Map: Stockton Coal Seam 1100 X 8715 9333 8612 X 1152 9034 9332 837 797 7913
Reserves 75.2 Million tons of in place reserves. Quality Data: Average Average Average Average Coal Seam Name: Thickness ASH % Sulfur % BTU Stockton 5.2 12.0 0.84 13,300 Coalburg 7.2 20.4 0.55 11,800 Lower Coalburg 4.0 19.0 0.55 12,100 * Quality Data is at a 6% As Received Moisture.
Seam Thickness Seam Thickness 1152 X 1100 X 8613 9333 8715 868 835A 9332 9304 9331 9044 8712 656 9302 8714A 9303 9301 9305 8612 9034 9036 8611 798 653 7913 837 797 3.5 4.0 4.5 5.0 5.5 6.0 6.5 4.5 5.0 3.8 3.9 5.8 6.0 4.3 5.8 5.6 6.3 6.0 4.1 6.9 5.5 3.3 3.5 4.1 5.2 5.6 5.5 6.7 6.0 5.6 4.8 3.0 Isopach Map: Stockton Seam Thickness
Bench Layout Initial Bench Development: Intermediate Benches 65 Highwall Angle 50 Intermediate Benches For Slope Control Max Height of 75 Vertical Highwalls will be utilized once initial bench development is completed. Main Production Bench
Mine Production Operations 2 Shifts/Day, 6 day/wk, 312 day/yr Initial Production First five (5) years ~ 2.5 mm tons Difficulty Factor of 2 since we will only be utilizing two (2) shovels s and will have half the production until the plant and facilities are built and put into operation. Full Production Starts in year six (6) once we are done with facilities and have the second production pit up and running with second pair of shovels and necessary equipment.
Mine Timing Mining will commence in 2008, and continue through until 2024. Difficulty Factor of 2 utilized for first 5 years due to half production status and construction of mine facilities. Additional Area Not Yet Mined Mining Commences in Pit #1
Permitting Agencies Involved Office of Surface Mining State and Federal Fish & Wildlife Management Agency State Historic Preservation Agency Environmental Protection Agency Corps of Engineers MSHA Etc. Costs Associated with Permitting Minimum ~ $185,000 Maximum ~ $270,000
Sequence During Site Preparation Reclamation Water diversions & ponds Timbering, Stabilize Facility Area During Overburden Removal Divert Water Remove and Store Top Soil Coal Removal After Coal Removal Seal highwall and low wall Backfill & bury toxic materials Prior to first Planting Season Fine grade and spread top soil Mulch and tack During Planting Season Seed & revegetate Intervals Thereafter Monitor and control slope stability, water quality and vegatation growth
Surface Facilities (2) R.O.M. feeders (2) Grizzly screens (2) Double roll crushers (1) Raw coal stacking tube (1) Direct ship coal stacking tube, (1) Clean coal stacking tub (1) Refuse overland belt (2) Clean coal silos Train load out facility Overland belt to the trainload out facility 100 car train * 100 tons per car = 10,000 tons per train 500 TPH Rated Capacity preparation plant Office Warehouse Fuel Station Bathhouse Etc.
Preparation Plant Plant will begin operation on January 1, 2011 Operating 6 days a week and 24 hours a day The plant will clean the Coalburg, Lower Coalburg and 10% of all Pit Cleanings: Total Coalburg seam: 22 million raw tons Total Lower Coalburg seam: 15 million raw tons 10% Pit Cleanings: 75 million tons of total raw coal within the mining boundary* 10% = 7.5 million tons Total tons raw coal = 22 + 15 + 7.5 = 44.5 million tons 14 years left when plant is built / 17 years, shows that approximately 20% of the coal will be mined prior to putting in the Prep-Plant: 44.5 * 20% = 35.6 million total tons remaining as of Jan 2011 35.6 million / 14 years = 2.5 million tons per year 2.5 million tons per year / 312 days per year = 8,200 tons per day 8,000 tons per day / 24 hours a day = 340 tons per hour 340 tons per hour + 25% rock = 425 tons per hour 425 tons per hour / 85% plant efficiency = 500 tons per hour rated capacity for design 60% clean coal yield
Valley Fills 8 Possible Valley Fill Locations: Capacity: 1 28.9 million yd3 2 3.6 million yd3 3 2.8 million yd3 4 2.8 million yd3 Total = 99.2 million yd3 5 5.1 million yd3 6 11.9 million yd3 7 18.4 million yd3 8 25.7 million yd3 Using Using Average Area Calculations.
Cost per Raw Ton Basis Cost per Raw Ton Calculations Full Production 4,600,000 Tons Half Production Cost per Raw Ton Calculations Without Dollars Prep Plant (000) $/ton With Prep Plant 2,500,000 Tons 2,500,000 Tons Dollars (000) $/ton Dollars (000) Based $/ton 6 day work week Labor Cost $ 9,750,992 $ 2.12 Labor Cost $ 6,785,912 $ 2.71 $ 7,498,072 $ 3.00 Based on 6 day work week Based on 57% covering FICA, futa, insurance, pension, medical, worker's $ $ 1.21 Based on 57% covering FICA, futa, insurance, pension, medical, worker's Employee Benefit Cost $ 3,867,970 $ 1.55 $ 4,273,901compensation, $ 1.71 black lung, ect. compensation, black lung, ect. Supply Costs $ $ 15,625,000 $ 6.25 $ $ 15,625,000 5.75 Based $ on Supply 6.25 Based Cost on from Supply Peabody Cost from Peabody Energy Energy Employee Benefit Cost 5,558,065 Supply Costs 26,450,000 Power $ 2,850,000 $ 1.14 $ 2,850,000 $ 1.14 Power Costs based on 2.9 cents per kilo-watt hour Power Costs based on 2.9 cents per kilo-watt hour Power $ 5,700,000 $ 1.24 Property & Other Taxes $ 2,932,039 $ 0.85 $ 2,932,039 $ 0.85 Estimated Property and Other taxes from Capital Expenditure Property and Liability $ $ 0.96 Estimated Property and Other taxes from Capital Expenditure $ 750,000 $ 0.30 $ 750,000 $ 0.30 Estimated high for new company Insurance Reclamation Fee $ $ 375,000 $ 1,380,000 0.15 $ $ 0.30 Estimated high for new company 375,000 $ 0.15 Set by federal law at $0.15 Property & Other Taxes 4,798,000 Property and Liability Insurance Mine Closing Cost $ 250,000 $ 0.10 Reclamation occurs during the mining process, based on 7 million dollar final $ $ $ 0.15 250,000Set $ by federal 0.10law closing at $0.15 costs. Reclamation Fee 690,000 State Severance Tax $ 4,375,000 $ 1.75 $ 4,375,000Reclamation $ 1.75 occurs High for during new mines the in mining West Virginia process, based on 9 million dollar $ $ 0.10 closing costs Total Operating Cost $ 37,810,920 $ 15.12 $ 38,929,012 $ 15.57 Mine Closing Cost 460,000 State Severance Tax $ 7,755,600 $ 1.69 High for new mines Overhead Costs $ 1,890,546 $ 0.76 $ 1,946,451 $ 0.78 Based in on West 5% of Total Virginia Operating Cost Total Operating Cost $ 62,542,657 $ 13.60 Direct Cost $ 39,701,466 $ 15.88 $ 40,875,462 $ 16.35 Estimate Basis Description Estimate Basis Description Overhead Costs $ 3,127,133 $ 0.68 Direct Cost $ 65,669,790 $ 14.28 Based on 5% of Total Operating Cost Based on 2mm tons of Clean Coal Product Annually
Net Cash Flow - Mountaineer Mining Company 80,000 Additional Equipment Purchased 60,000 40,000 Dollars (000) 20,000 - (20,000) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Second Production Line is Purchased (40,000) (60,000) Period (Year)
Economic Analysis Coal Prices Raw Direct Ship @ $35/ton Clean Coal @ $55/ton Capital Expenditures Total = $164.8 million Equipment = $136 million Mineral and Property Value MV calculated using Royalty Basis @ 5% of GSP PV calculated using $1000 / acre (4570 acres of Property) Analysis Mine will not turn a profit until Period 3 NPV @ 7% ~ $348 million IRR ~ 47.1%
Conclusion Rum Creek Surface Mine economic analysis shows the project can turn a reasonable profit. Further evaluation is necessary to properly assess all aspects of a full feasibility study.