Whitehorse, Yukon — As part of a broader goal to become an emerging energy producer,
The bankable feasibility study nearing completion is expected to confirm the positive results of a previous scoping study for a proposed open-pit mine capable of producing about 1.37 million tonnes of thermal and metallurgical coal for at least 22 years.
If all goes as planned, Division Mountain would be the Yukon’s first major coal mine. The territory has an estimated 800 million tonnes of coal resources in various deposits, with the largest being Bonnet Plume basin (600 million tonnes in a series of deposits) north of Dawson City. Bonnet Plume’s size and low sulphur content make it an attractive prospect, but location is not on its side. Division Mountain has smaller amounts of top-quality coal, but is farther south, 20 km west of a highway, and parallels Yukon Energy’s main power grid. And notwithstanding its mountain moniker, the project has gentle terrain that poses no significant logistical challenges.
President Basil Botha is confident that Division Mountain can compete with western Canadian producers, even though coal must be transported 290 km by road to a year-round tidewater port at Skagway, Alaska.
“We’d love to do it by rail obviously, but that’s not possible,” Botha said during a recent site visit by The Northern Miner. “Still, our (transportation) costs are in the range of southern producers.”
The final feasibility study will provide definitive numbers, but the scoping study showed transportation costs of $21.50 per tonne to Skagway, which compares favourably with Alberta and British Columbia producers that must haul their product an average of 1,100 km by rail to Pacific ports. Elk Valley Coal, for example, expects to pay $37 per tonne for transportation to Vancouver-area ports this year, up from $29 per tonne a year earlier because of increased rail rates.
Other companies with advanced mining projects in the Yukon are seeking to use Skagway to ship concentrates to Asian smelters, which could raise concerns from the tourism sector, as the port is used by the summer cruise ship industry. At this stage however, discussions between port authorities, private companies and the governments of Alaska and the Yukon appear to be positive.
“Skagway also offers the advantage of almost three days less sailing time to South Korea and Japan than southern ports such as Vancouver,” Botha adds.
Cash is basing its mine plans on a resource of 51.6 million tonnes of highly volatile B bituminous coal, suitable for sale to thermal markets in the Pacific Rim. This includes a measured resource of 38.6 million tonnes and an indicated resource of 13 million tonnes, identified to a maximum depth of 290 metres.
The estimate was prepared earlier this year by Norwest Corp., an independent consulting firm, in compliance with National Instrument 43-101 standards. At the time, Norwest noted that resources defined to date represent less than 5% of the property, and could be increased substantially with additional drilling.
Cash carried out some drilling this year, mostly to upgrade inferred resources to the measured category, and provide data for various technical and marketing studies.
The company has the benefit of data from past work on the property, which has an exploration history dating back to 1907, when the Geological Survey of Canada made the first discoveries. The then-remote location and low coal prices kept Division Mountain undeveloped for most of the century. The project was revived in the 1970s when coal prices got a boost from the booming economies of Japan and South Korea.
A predecessor of Cash Minerals funded an exploration program in the early 1980s, and optioned the project to Alaska’s Usibelli coal mine in 1998. New discoveries were made, but coal prices fell again, scuttling plans for additional work.
Between 1972 and 1999, Division Mountain had been tested by 10.2 km of excavator trenching, 64 diamond drill holes totalling 10,555 metres and 20 reverse-circulation holes totalling 1,869 metres.
Cash Minerals revived the project in response to growing demand for coal from China and other booming Asian economies. After a 2004 restructuring program, Cash brought in a new management team led by Botha, who has more than 20 years of experience in the coal industry, mostly in South Africa.
Botha believes coal prices and demand will remain strong, not just because India and China have billions of people still in need of basic amenities such as electricity, but also because no energy substitutes have emerged that can compete with coal, oil and gas, and uranium.
“People love windmills — but not in their backyard, and not when they kill thousands of birds,” Botha says.
Botha notes that hydrogen and various “alternative” energy sources aren’t cost-competitive, let alone technically feasible in some cases. Consequently, he expects energy consumption to rise, along with prices. “The days of cheap energy are over.”
Division Mountain will be relatively inexpensive to develop, despite its northern location. The scoping study estimates capital costs of $31.9 million to build the mine, wash plant and related facilities.
“It’s a small mine,” Botha says. “We’re looking at contracting out the mining and road haulage. We’d just operate the wash plant.”
The proposed mine is expected to produce about 900,000 tonnes of bituminous B coal on an annual basis for sale on the global thermal market, plus an additional 300,000 tonnes of pulverized coal injection (PCI). Another 175,000 tonnes could be made available for a proposed 40-MW, “mine-mouth” coal plant on or near the property.
“A major advantage of this project is the quality of our coal,” Botha said. “It burns as clean as you can get coal to burn.”
Norwest’s technical report states that Division Mountain’s coal exceeds sales requirements for thermal coal in the Asian market, with essential clean coal parameters of 11% ash, 0.58% total sulphur and 6,795 kilocalorie per kg calorific value, and is also suitable for PCI coal used in steel production. The final study will include results from more definitive testing.
The final study will also determine stripping ratios for the proposed series of four open pits, however initial estimates are that they will average about 6.3:1 over the mine life (based on a conservative 50 slope angle in the scoping study). Seam thicknesses average 4.4 metres, with the thickest averaging 10.5 metres.
While economic valuations are preliminary, Norwest’s scoping study shows a robust project, with a 60% internal rate of return and a net present value of $74.8 million.
Assuming a positive feasibility study, and once the mine is up and running, Cash plans to expand resources through ongoing exploration. Previous exploration, including drilling and trenching, has exposed both coal and favourable stratigraphy within a 7.5-km radius of the delineated resource. Among the priority targets is Corduroy Mountain, 4 km east of the delineated resource. Past trenching exposed an aggregate thickness of 23 metres of coal, with a maximum seam width of 3 metres, while subsequent drilling indicated an aggregate thickness of up to 18 metres.
Drilling for coal-bed methane is also proposed for Division Mountain.
Meanwhile, environmental and socioeconomic studies are well advanced, and the territorial government has assigned a project co-ordinator to assist the company through the permitting process.
Cash has already established a relationship with the Champagne and Aishihik First Nations, which hold lands prospective for coal adjacent to Division Mountain.
Elsewhere in the Yukon, Cash holds rights to earn interests in six uranium projects. All host uranium showings that were explored by major companies during the uranium boom o
f the late 1970s and early 1980s.
Four projects in the Wernecke Mountain area of northeastern Yukon are hosted in Proterozoic-age iron-oxide breccia bodies that share similarities to the iron-oxide-copper-gold (IOCG) deposit model. The others, one in west-central and the other in southeastern Yukon, are hosted in Cretaceous granitic intrusions are viewed as bulk-tonnage targets modelled on the Rossing deposit in South Africa.
Among the more advanced IOCG projects is the Lumina property in the Wernecke Mountains. A 6,000-metre drill program will test several mineralized showings, including the Jack Flash prospect where trenching and sampling this summer returned an average grade of 1.22% U3O8. Other properties in the Wernecke Mountains will also be tested.
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