Jan Karski Mine
The Jan Karski Mine (“JKM” or “Project”, formerly Lublin Coal Project) is an advanced, large scale premium coal project in south eastern Poland. The Project has attractive coal quality parameters, particularly within the 391 seam, with the potential to produce semi-soft coking coal, comparable to international benchmark semi-soft coking coals as well as semi-soft coking coals already produced in Poland.
The Project is located close to well established regional rail and port infrastructure with underutilised bulk cargo capacity for low transportation costs within Poland, to regional European markets by rail, and to the seaborne export market through underutilised ports in the north of Poland.
The Project is located close to well established regional rail and port infrastructure with underutilised bulk cargo capacity for low transportation costs within Poland, to regional European markets by rail, and to the seaborne export market through underutilised ports in the north of Poland.
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Project Location Map in Poland Coal Concessions
The Jan Karski Mine is a well-defined coal resource, located in an area with a long history of coal mining. The Project is situated adjacent to the Bogdanka coal mine which has been in commercial production since 1982. Bogdanka has successfully demonstrated that the Lublin Coal Basin has the potential to host a new generation of large scale coal projects. The Lublin basin has ideal geological and mining conditions for high productivity longwall operations. As a result of these favourable conditions Bogdanka has previously achieved world record production rates and is currently the lowest operating cost hard coal mine in Europe. Bogdanka produced 9.2 Mt of saleable coal in 2014 and reached its production target of 8.5 Mt in 2015 with a focus on operational efficiency and cost reduction.
PRE-FEASIBILITY RESULTS
On 8 March 2016, Prairie announced the results of a Pre-Feasibility Study for the Project which confirmed its potential to became a world-class mining operation. The PFS was prepared by independent, international consultants Golder Associates (UK) (“Golder”) and Royal HaskoningDHV UK Limited (“RHDHV”), with input from other specialist International and Polish consultants.
Key Pre-Feasibility Study Parameters included the following:
LOW OPERATING COSTS
The JKM is projected to have an average operating cash cost of US$24.96 per tonne FOR at steady state production for all of its saleable coal products, producing an average 6.34Mtpa.
LOW OPERATING COSTS
The JKM is projected to have an average operating cash cost of US$24.96 per tonne FOR at steady state production for all of its saleable coal products, producing an average 6.34Mtpa.
The JKM’s very low operating costs are primarily due to the following inherently favourable attributes:
ORE RESERVE ESTIMATE
The PFS incorporates a mine plan based on an initial Marketable Ore Reserve Estimate generated from the indicated resources within the 391 and 389 seams, and other Project refinements since the completion of the Scoping Study in April 2014. Utilising the Project’s initial Marketable Ore Reserve Estimate of 139.1 million tonnes (“Mt”) of coal, the Project can support average steady state production of 8.0 million tonnes per annum (“Mtpa”) Run-of-Mine (“ROM”) coal, yielding an average of 6.34Mtpa of saleable clean coal.
- A large resource base of flat lying, consistent and laterally continuous coal seams with a low incidence of geological structures, which allows for highly productive longwall panels up to 5km long and 400m wide;
- Stable geological setting with a very low risk of potential hazards such as rockbursts and outbursts, and very low in-situ coal seam methane gas contents, as the record from 34 years of coal mining in the region demonstrates;
- Minimal surface constraints given that agricultural activity dominates in the area of the Company’s concessions;
- Close proximity to existing and underutilised rail and port transport infrastructure that provides access to coal markets in Poland and wider Europe by rail, and to seaborne export markets;
- Located within a mature coal mining country with access to a highly skilled coal mining workforce; and
- Competitive power, labour and utilities costs.
ORE RESERVE ESTIMATE
The PFS incorporates a mine plan based on an initial Marketable Ore Reserve Estimate generated from the indicated resources within the 391 and 389 seams, and other Project refinements since the completion of the Scoping Study in April 2014. Utilising the Project’s initial Marketable Ore Reserve Estimate of 139.1 million tonnes (“Mt”) of coal, the Project can support average steady state production of 8.0 million tonnes per annum (“Mtpa”) Run-of-Mine (“ROM”) coal, yielding an average of 6.34Mtpa of saleable clean coal.
HIGH QUALITY COAL
The coal quality results from washability testing of the 391 seam from the core drill holes compare favourably with the quality specifications of standard international benchmark semi-soft coking coals which are produced in New South Wales, Australia.
The coal quality results from washability testing of the 391 seam from the core drill holes compare favourably with the quality specifications of standard international benchmark semi-soft coking coals which are produced in New South Wales, Australia.
In relation to thermal coal specifications, the 391 seam washed coal quality compares exceptionally well to the globally recognised thermal coal API benchmark, both in terms of calorific value (heat content) and ash content. This means the specification compares well to both Russian and Colombian thermal coals, that account for approximately 60% of Europe’s thermal coal imports.
PREMIUM PRODUCTS
Given the exceptional in-situ quality of the 391 coal seam the Company is targeting to produce a range of saleable products for sale into different markets. By utilising modern wash plant technology, as is typically used in other world class coal mines in the USA, South Africa or Australia, the Company plans to be able to adjust the product split as required by the market. Such flexibility in product mix represents a significant potential competitive advantage for the Project since it provides mitigation against JKM coal sales from becoming captive to specific end-users.
COAL RESOURCE
Prairie previously announced (refer ASX announcement 23 July 2015) a Coal Resource Estimate (“CRE”) prepared in accordance with the JORC Code (2012 edition). For the PFS, the CRE has now increased to 728 million tonnes (“Mt”) including an Indicated Resource of 181Mt from two coal seams, the 391 and 389 seams.
The CRE is based on the results of Prairie’s own drilling program and the results of historical drilling by the Polish government who drilled 200 boreholes in the region, including a total of 117 boreholes within the JKM. The CRE has been modelled based on data from 10 coal seams that were considered economically extractable and applies a 1m seam thickness cut off and a 100m stand-off from the Jurassic formation.
In January 2015 Prairie was granted an additional Concession for coal contiguous with JKM. The new Concession, Sawin-Zachod, has the potential to increase Prairie’s coal resource and increase future mine life at the JKM.
MINE DEVELOPMENT
The JKM has a well-defined CRE of 728Mt located in an established coal basin with a 34 year history of coal mining. The highly productive coal mining operation of Bogdanka, with similar geological and mining conditions, is located immediately adjacent to Prairie’s JKM. As a result, the Company has a greater degree of confidence in many of the mine design elements of the JKM, beyond what is typical for a pre-feasibility level project, since it can incorporate the knowledge and experience gained from this neighbouring low cost, world-class mining operation.
The mine plan presented in the PFS includes total production of 176.7 million raw tonnes and 139.1 million saleable tonnes over a 24-year period predominantly from the 391 coal seam, with secondary production from the 389 coal seam.Two shafts are planned for the JKM, one for bulk coal winding and upcast/return ventilation, and one for staff, materials and downcast/intake ventilation.
The JKM proposes that mining will be by longwall retreat caving method using modern, fully mechanised and automated faces. It was assumed that two longwall systems will be utilised simultaneously during steady state production at the JKM, operating in different parts of the mine. The mine plan is based on single entry panel developments supported by roofbolts to form the longwall panels.
Project configuration includes a basic mine infrastructure site, CHPP, product stockpiles and coal wash emplacement facilities with a circa 15km railway spur line connection providing direct access to the Polish railway network.
MINE DEVELOPMENT
The JKM has a well-defined CRE of 728Mt located in an established coal basin with a 34 year history of coal mining. The highly productive coal mining operation of Bogdanka, with similar geological and mining conditions, is located immediately adjacent to Prairie’s JKM. As a result, the Company has a greater degree of confidence in many of the mine design elements of the JKM, beyond what is typical for a pre-feasibility level project, since it can incorporate the knowledge and experience gained from this neighbouring low cost, world-class mining operation.
The mine plan presented in the PFS includes total production of 176.7 million raw tonnes and 139.1 million saleable tonnes over a 24-year period predominantly from the 391 coal seam, with secondary production from the 389 coal seam.Two shafts are planned for the JKM, one for bulk coal winding and upcast/return ventilation, and one for staff, materials and downcast/intake ventilation.
The JKM proposes that mining will be by longwall retreat caving method using modern, fully mechanised and automated faces. It was assumed that two longwall systems will be utilised simultaneously during steady state production at the JKM, operating in different parts of the mine. The mine plan is based on single entry panel developments supported by roofbolts to form the longwall panels.
Project configuration includes a basic mine infrastructure site, CHPP, product stockpiles and coal wash emplacement facilities with a circa 15km railway spur line connection providing direct access to the Polish railway network.
Lublin Coal Project Minesite Layout- PFS (March 2016)
PROJECT PERMITTING
On 1 July 2015, Prairie announced that it had secured the Exclusive Right to apply for, and consequently be granted, a Mining Concession for the JKM. This follows the approval by Poland’s Minister of Environment of Prairie’s previously submitted Geological Documentation and is in accordance with the terms of the Polish Geological and Mining Law (2011). Geological Documentation is a resource estimate prepared according to the standards prescribed in the Polish resource reporting code.
As a result of its Geological Documentation being approved, Prairie is now the only entity that can lodge a Mining Concession application over the JKM within the next three (3) years. The Company is advancing technical and environmental feasibility programs for the JKM in accordance with standards of international best practice and intends to submit the Mining Concession application for the Project in 2017.
SOCIOECONOMIC POSITION
Prairie commissioned Deloitte Poland to complete an Economic Benefits Study (“Deloitte Study”) that outlined the potential benefits that the Project could bring to the Lublin region and to the Polish economy. The Deloitte Study found that 2,000 direct and 10,000 indirect jobs could be created and that a significant improvement in standard of living would occur within the municipalities in the vicinity of the LCP. The Project would stimulate the development of education, health service, and communications.
Given the importance of coal mining to the region and the country, community attitudes towards new underground coal mine developments are positive. The new Regional Spatial Development Plan of Lublin, which was passed by the Lublin Regional Assembly in October 2015, established that a leading strategy in the Lublin region is the development of coal mine infrastructure. This resolution as well as continuous support from local communities and authorities significantly facilitate and encourage the development of the JKM.
DEVELOPMENT STRATEGY
Prairie will now work with international and Polish experts on the PFS optimization process prior to commencing the Definitive Feasibility Study (“DFS”) to ensure that the best technical and commercial solutions, taking into account environmental and stakeholder expectations, are selected as the “go forward” case for the DFS. Prairie’s Polish and international management team will also commence discussions with potential off-takers and EPC contractors as well as focus on Project permitting.
NET PRESENT VALUE
The (ungeared) Net Present Value post tax is US$1.39 billion at an 8% discount rate (real), and the (ungeared) IRR is 26.6%. The Project is expected to exhibit levels of profitability that would contribute significant value to Prairie shareholders.
Competent Person Statements
The information in this announcement that relates to Coal Reserves, Mining, Coal Preparation, Infrastructure, Production Targets and Cost Estimation is based on, and fairly represents, information compiled or reviewed by Mr Stephen Newson, a Competent Person who is a Chartered Engineer and Fellow of the Institute of Materials, Minerals and Mining (UK) and has a 1st Class Mine Manager’s Certificate of Competency. Mr Newson is employed by independent consultants Golder Associates (UK). Mr Newson has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Newson consents to the inclusion in the report of the matters based on their information in the form and context in which it appears.
The information in this announcement that relates to Exploration Results and Coal Resources is based on, and fairly represents, information compiled or reviewed by, Mr Samuel Moorhouse, a Competent Person who is a Chartered Geologist and is employed by independent consultants Royal HaskoningDHV UK Limited. Mr Moorhouse has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Moorhouse consents to the inclusion in the report of the matters based on their information in the form and context in which it appears.
Forward Looking Statements
This announcement may include forward looking statements. These forward looking statements are based on Prairie’s expectations and beliefs concerning future events. Forward looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside the control of Prairie, which could cause actual results to differ materially from such statements. Prairie makes no undertaking to subsequently update or revise the forward looking statements made in this release, to reflect the circumstances or events after the date of this announcement.