Debiensko Mine
The Debiensko Mine (“Debiensko” or “Project”) is a fully permitted, hard coking coal project located in the Upper Silesian Coal Basin in the south west of the Republic of Poland. Debiensko is bordered by the Knurow-Szczyglowice Mine in the north west and the Budryk Mine in the north east, both owned and operated by Jastrzębska Spółka Węglowa SA (“JSW”), Europe’s leading producer of hard coking coal.
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The Debiensko mine was originally opened in 1898 and was operated by various Polish mining companies until 2000 when mining operations were suspended due to a major government led restructuring of the coal sector caused by a downturn in global coal prices. In early 2006 New World Resources Plc (“NWR”) acquired Debiensko and commenced planning in order for the Project to comply with Polish mining standards and with the aim of accessing and mining hard coking coal seams. In 2007, the Minister of Environment of Poland approved the Group’s development plan and in 2008 granted NWR a 50-year mine license for Debiensko.
In October 2016, Prairie Mining Limited acquired all of the issued shares of NWR Karbonia S.A. who held 100% beneficial interest in the Debiensko Project.
Infrastructure
With existing site facilities and infrastructure including power, water, rail and road in addition to the mining concession, environmental consent and local planning all being in place, the Project is considered “development-ready”. Debiensko’s strategically competitive location means that approximately half of Central Europe’s coking plants and steelmaking capacity are within 250km of the Project and are connected by existing road and rail infrastructure.
In October 2016, Prairie Mining Limited acquired all of the issued shares of NWR Karbonia S.A. who held 100% beneficial interest in the Debiensko Project.
Infrastructure
With existing site facilities and infrastructure including power, water, rail and road in addition to the mining concession, environmental consent and local planning all being in place, the Project is considered “development-ready”. Debiensko’s strategically competitive location means that approximately half of Central Europe’s coking plants and steelmaking capacity are within 250km of the Project and are connected by existing road and rail infrastructure.
Revised Development Approach
Following detailed technical due diligence by Prairie, the Company is confident that a revised development approach would allow for the early mining of profitable coal seams, whilst minimising upfront capital costs. This is likely to include focusing on a smaller area of Debiensko to target coal seams that are more readily accessible. Prairie has proven expertise in defining commercially robust projects and applying international standards in Poland.
Following detailed technical due diligence by Prairie, the Company is confident that a revised development approach would allow for the early mining of profitable coal seams, whilst minimising upfront capital costs. This is likely to include focusing on a smaller area of Debiensko to target coal seams that are more readily accessible. Prairie has proven expertise in defining commercially robust projects and applying international standards in Poland.
Scoping Study Results
Published on 16 March 2017 Scoping Study for Debiensko mine highlights the technical viability and robust economics of the mine to potentially be a large scale, low cost and long life premium hard coking coal supplier. With a JORC Resource of 301 Mt, Debiensko has the potential to be a globally significant project.
Key results of the Study were as follows:
Published on 16 March 2017 Scoping Study for Debiensko mine highlights the technical viability and robust economics of the mine to potentially be a large scale, low cost and long life premium hard coking coal supplier. With a JORC Resource of 301 Mt, Debiensko has the potential to be a globally significant project.
Key results of the Study were as follows:
Potential High Margin, Significant Cash Flow Generation
The results of the Study demonstrate the potential for exceptionally high operating margins and cash flow generation given the anticipated low operating costs for Debiensko. This is achieved because Prairie is pioneering in Poland well established international best practice in mine design, production organisation and technology for the project. Debiensko benefits from being a formerly operating mine, giving an excellent understanding of geology and mining conditions with substantial existing infrastructure available on site.
Based on an independent marketing study conducted by CRU International (“CRU”), a long term hard coking coal benchmark price forecast of US$142/t (FOB Australia, real 2016 $) has been used in this Study. Due to the considerable transport cost advantages compared to imported hard coking coal, the CRU study also identified that Debiensko would potentially benefit from a substantial netback premium of ~US$15/t above benchmark prices for coal sold to regional Central European customers.
Potentially Lowest Global Cash Operating Cost Delivered into Europe
Debiensko is projected to have an average steady state total cash cost of approximately US$47 per tonne Free On Rail (“FOR”) for its premium hard coking coal, producing an average of 2.6 Mtpa saleable hard coking coal. Hard coking coal product from Debiensko is anticipated to be at the bottom of the global cost curve for hard coking coal delivered into Central Europe, with a delivered cost of approximately US$51 per tonne (FOR total cash cost + rail to typical regional customer).
The Study assumes that a substantial portion of the mining equipment fleet will be leased, which is common for underground coal mines in the region. In addition, there is a royalty of approximately PLN 2.80 (~US$0.70) per saleable tonne, in-line with the established Polish fiscal regime.
Debiensko is projected to have an average steady state total cash cost of approximately US$47 per tonne Free On Rail (“FOR”) for its premium hard coking coal, producing an average of 2.6 Mtpa saleable hard coking coal. Hard coking coal product from Debiensko is anticipated to be at the bottom of the global cost curve for hard coking coal delivered into Central Europe, with a delivered cost of approximately US$51 per tonne (FOR total cash cost + rail to typical regional customer).
The Study assumes that a substantial portion of the mining equipment fleet will be leased, which is common for underground coal mines in the region. In addition, there is a royalty of approximately PLN 2.80 (~US$0.70) per saleable tonne, in-line with the established Polish fiscal regime.
Premium Quality Hard Coking Coal
Preliminary analysis indicates that a range of premium hard coking coals that will be in high demand from European steelmakers can be produced from Debiensko. This analysis is based on historical data, neighboring operational coking coal mines and the results of a suite of modern coking tests performed on selected seams from a fully cored borehole drilled by the previous owners in 2015/16. Two premium hard coking coal specifications have been delineated from select seams at Debiensko, namely Medium volatile matter hard coking coal (“Mid-vol HCC”) and Low volatile matter hard coking coal (“Low-vol HCC”). Future study phases will determine the precise Debiensko premium hard coking coal quality specification on a year by year basis depending on final adopted mine plan, mining schedule and extent of coal blending.
Both Debiensko’s Mid-vol and Low-vol HCC lie within the range of premium hard coking coals produced globally. Indications are that the Mid-vol HCC at Debiensko is present between 850 m to 1,000 m from surface and the Low-vol HCC is present 1,000 m to 1,300 m below surface, i.e. at depths similar to adjacent operating mines owned by JSW - the largest coking coal producer in Europe.
Preliminary analysis indicates that a range of premium hard coking coals that will be in high demand from European steelmakers can be produced from Debiensko. This analysis is based on historical data, neighboring operational coking coal mines and the results of a suite of modern coking tests performed on selected seams from a fully cored borehole drilled by the previous owners in 2015/16. Two premium hard coking coal specifications have been delineated from select seams at Debiensko, namely Medium volatile matter hard coking coal (“Mid-vol HCC”) and Low volatile matter hard coking coal (“Low-vol HCC”). Future study phases will determine the precise Debiensko premium hard coking coal quality specification on a year by year basis depending on final adopted mine plan, mining schedule and extent of coal blending.
Both Debiensko’s Mid-vol and Low-vol HCC lie within the range of premium hard coking coals produced globally. Indications are that the Mid-vol HCC at Debiensko is present between 850 m to 1,000 m from surface and the Low-vol HCC is present 1,000 m to 1,300 m below surface, i.e. at depths similar to adjacent operating mines owned by JSW - the largest coking coal producer in Europe.
Maiden Coal Resource Estimate
The maiden CRE, confirms that the coal seams within Debiensko form an extensive, moderately dipping, and laterally consistent set of coal seams containing high quality hard coking coal.
The CRE has been peer reviewed by Royal HaskoningDHV who has over 135 years’ experience, providing expertise in the fields of aviation, buildings, energy, industry, infrastructure, maritime, mining, transport, urban and rural planning and water. Royal HaskoningDHV has worked extensively in deep European coal mining including in the UK, Kazakhstan and Poland.
The CRE which was prepared by a Competent Person and reported in accordance with the JORC Code (2012), comprises 93 Mt in the Indicated Category as part of a total CRE of 301 Mt. The CRE is based on seven of the thickest and most consistent hard coking coal seams within the Debiensko licence area.
* Rounding errors may occur
** The Indicated and Inferred Resource tonnage calculations are reported with geological uncertainty of ±10% and ±15% respectively
** The Indicated and Inferred Resource tonnage calculations are reported with geological uncertainty of ±10% and ±15% respectively
Debiensko has attractive coal quality parameters, within all seams, with the proven potential to produce high quality hard coking coal. The resource estimate does not present washed coal quality results, but instead presents only raw unwashed coal parameters.
Prairie has scrutinised the historical data and incorporated data from the recently drilled Debiensko 12 borehole to produce this estimate and confirm coal quality. Furthermore, the CRE focuses on seven of the thicker, more laterally extensive coals. Further seams of potentially workable thickness occur, but are generally not laterally extensive enough to warrant inclusion at this stage. This CRE, which was first declared in February 2017 (refer to 1 February 2017 announcement ‘Maiden 301 Million Tonnes Hard Coking Coal Resource Confirmed at Debiensko’), underpins the production target. Due to the substantial resource base of 301 Mt of coal across the Debiensko concession, the Study has only considered a mine plan with 26 years of saleable coal production of which 64% is mined from within Indicated Resources. Of the 26 years of saleable coal production in the mine plan (refer below), the first 14 years of production is mined exclusively from Indicated Resources.
Environmental & Social Impact Assessment
The development of the Debiensko mine involves underground mining works and the construction of new surface supporting facilities developed on an existing industrial mine site. Extensive and various studies covering land use, waste management, noise, habitat, water and air pollution have been conducted since 2007 and were incorporated into a Polish compliant Environment Impact Assessment (“EIA”). The approval of this EIA resulted in the award of mining concession in 2008. A new and revised Environmental Consent was granted in July 2015, modifying some aspects of the previous consent facilitating a more flexible and efficient mine plan. Accordingly, Debiensko is a fully permitted “development-ready” project with an initial mining license issued for 50 years.
Social impact studies previously undertaken assessed the project as positive due to employment prospects and economic benefits to the community. Debiensko will be the key economic driver of the municipality for decades and will be the heart of a community that fully accepts and is supportive of the planned mine.
Mine Development
The mine plan presented in the Scoping Study includes total predicted production of 102 million raw tonnes and 68 million saleable tonnes over a 26 year period from the 401/1, 403/1 404/9 and 405 coal seams.
At the forecast rate of steady state production of approximately 4 Mtpa of Run of Mine (“ROM”) coal, two longwall units would be operating at the same time in different sections of the mine. Two shafts will be used for the mine development and production.
Results of the Study also indicate that by incorporating international best practice and modern mine design into Debiensko, substantially better labour productivity may be achieved compared to incumbent coal producers in Poland, which may lead to substantially lower costs of production.
Best international design practices will be employed for the Debiensko mine surface infrastructure whilst adhering to applicable Polish regulations. Debiensko benefits from the incorporation of existing mine surface infrastructure from the former Debiensko mine.
3D visualisation of the Debiensko Mine Surface Area