The drop in the Canadian dollar against the US dollar is good news for Fortune Minerals‘ (FT-T) Lost Fox deposit at its Mount Klappan anthracite coal project located 330 km northeast of Prince Rupert, BC.
The pre-tax base-case net present value has risen to $1.28 billion from $702.7 million, using an 8% discount rate, as a result of the weakened dollar.
The pre-tax internal rate of return has risen to 40.9% from 28.9%.
And cash costs have dropped to US$88.64 per tonne ($106.79) from US$103 per tonne.
Fortune has updated the feasibility study on the Mount Klappan project, released last summer, to address the change in currencies. The update focuses on the Lost Fox deposit, one of four deposits within the Mount Klappan project, and evaluates an open pit coal mine that would produce 3 million tonnes of clean coal products per year over at least 20 years.
In the update, the company used an exchange rate of US83¢, down from US97¢ used in the summer 2008 feasibility study. Fortune first completed a feasibility study on Mount Klappan in 2005. At that time, the company used a long term exchange rate of US80¢.
While the project’s returns rose, so did capital costs for the first three years of the project, now projected at $655 million from $617 million, as a result of equipment being bought in US currency.
The economic analysis uses a price of US$175 per tonne for premium pulverized coal injection (PCI) products over the first five years dropping to US$150 per tonne for the remainder of the 20-year mine life at a US83¢ exchange rate.
The study verified the economics of 102 million tonnes of run-of-mine coal reserves and the production of 60 million tonnes of PCI coal.
Fortune says PCI is the most important new market for anthracite coal – hard coal with the highest rank, carbon and energy content, combined with the lowest moisture and volatile content of all coals. Only about 1% of all coals are anthracite grade, the preferred fuel source for new ‘clean coal’ technologies.
Fortune is currently working on an environmental assessment and mine permitting as well as looking into the potential of producing higher value products and power generation to enhance the economics.
The PCI product would be transported by truck from the site to an upgraded port facility in Stewart, BC, 150 km to the southwest, and from there, sent on to overseas steel customers.
Fortune is still looking for a strategic partner and other strategies for financing the project. The company has had CIBC World Markets helping it find a way to do so since last summer.
Meanwhile, Fortune has been working on its NICO cobalt-gold-bismuth-copper project located 160 km northwest of Yellowknife, NWT.
The company has completed a feasibility study on NICO that looks at underground and open pit mining, and has done its second $10-million underground bulk sampling program. Fortune is currently in the process of moving the Golden Giant Mine mill and surface facilities in Hemlo, Ont. to the NICO site, a purchase which the company says will reduce projected capital costs for mine development.
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