Cash Minerals considers coal project revival (June 06, 2008)

Now that coal’s back in style, economically speaking, Cash Minerals (CHX-V) has decided to dust off a two-year-old feasibility study for its Division Mountain coal property in the Yukon.

The news sent Cash shares up 26% today, or about 6, to 27 each on a trading volume of 11.5 million shares.

The feasibility study was completed in 2006, but concluded that the conditions at the time did not support mine development to serve the export market; since then Cash has been focusing on developing its uranium properties.

Division Mountain has a measured resource of 52.5 million tonnes of high volatile “B” bituminous thermal coal. The property, 100% owned by Cash, is comprised of 7.7 sq. km of coal leases and 3,600 sq. km of territorial coal exploration licences.

The recent rise in coal prices caused the company to think twice about its assets to “maximize shareholder value,” the company reports.

Cash plans to update the feasibility study to determine the potential for export coal.

The company also plans to look at the potential of a coal mine that would provide feedstock for a proposed mine-mouth power station that would be located next to the property, as was suggested in the earlier feasibility study.

An exploration program is being planned to determine the potential for metallurgical coal on the property and to upgrade and expand the existing resource.

The original feasibility study looked at building an open pit mine that would produce 240,000 tonnes of unwashed coal per year over a 20-year period.

Two years ago, development would have cost $14.1 million and the project had a net present value $21.88 million at discount rate of 5% and an internal rate of return of 28.5%. The company also expected a payback period of 4.4 years.

The study on the mine-mouth power plant estimated that the operating cost of 12.2 per kilowatt hour compared to Yukon Energy’s residential rate of 13.74 per kilowatt hour and the general service rate of 15.39 per kilowatt hour according to Yukon Energy’s 2005 annual report.