Cline Mining raises cash for New Elk coal mine in Colorado

VANCOUVER — Cline Mining (CMK-T) has completed a $45- million financing on the heels of a preliminary assessment for its wholly-owned New Elk coal mine project in southern Colorado.

Originally, the company only planned to raise $25 million but it increased the size of the sale after strong demand. In the end, the company sold 30.5 million shares at $1.48 apiece and plans to put the money towards further development of its flagship New Elk project.

In March, the company’s preliminary assessment for New Elk outlined a 20-year underground mine churning out 7,400 tonnes of coal a day once in full production.

The company plans to begin operating in the fourth quarter of this year at a daily rate of 3,300 tonnes and reach full production by 2013.

With capital costs pegged at US$65 million, the company estimates an internal rate of return of 98.7%. The study calculated a net present value of US$1.04 billion at a 10% discount rate using a coal price of US$112.40 per ton. Payback on capital expenditures is expected in a year and a half.

The New Elk mine has a measured and indicated coal resource of 52.5 million tonnes, while the property as a whole, spanning 84 sq. km, contains 286 million tonnes. The coal is present in three seams: Allen, Maxwell and Apache. Testing show that the seams are low-sulphur, metallurgical grade A and B bituminous coal that can also be sold for thermal applications.

Cline plans to use room-and-pillar mining, with second mining on retreat. The company also plans to use existing mine workings as much as possible, though rehabilitation will be necessary. The company has already dewatered the mine and installed a new ventilation system. A thick layer of overburden eliminated the possibility of open-pit mining.

The New Elk project is located about 39 km west of Trinidad in Las Animas Cty., Colo. The mine-plan area covers two rectangular properties totaling 2.8 sq. km. The mine is accessed by paved highway and is connected to rail networks.

The Colorado Fuel and Iron Steel Co. first opened the mine as the Allen mine in 1951. The company operated the mine until the early 1980s, when it shut operations and partially flooded the mine after closing its blast furnaces in the area. Thermal coal mining continued on the property at the Golden Eagle mine about 19 km east of the original mine until the early 2000s.

The historic production means the site already has a coal preparation plant, product-coal silos and a rail load-out, buildings, mine per-can mit, a permitted tailings site, surface real estate and underground workings.

In early February, the company completed another round of financing, raising $3 million in debt and $3.9 million from a brokered private placement of 13 million units at 30¢ per unit.

Cline Mining’s share price has made a steep and steady climb from 45¢ in March to just over $2 on April 19. The company has 98 million shares outstanding.