Published: February 22, 2016 |

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Paringa Resources Limited has received the results of a scoping study on the Buck Creek No.2 Mine, which is located within the Buck Creek mining complex and south of the Buck Creek No.1 Mine’s proposed 3.8 million tons per annum (Mtpa) coal project.

“The results of the scoping study further illustrate that the Buck Creek Mine Complex is without doubt the best undeveloped coal project in the highly sought after Illinois Basin. The scoping study has yielded extremely positive results, and if we knew from the outset what we know now, we would have always developed the No.2 Mine first. The emergence of the No.2 Mine has transformed the economics of the project and we are very excited about the enhanced strategy of creating a staged multi-project development by building the low capex No.2 mine first, followed by the No.1 Mine,” said Paringa’s President and CEO, David Gay.

When Paringa originally acquired the coal leases comprising the Buck Creek Mining Complex from two local coal entrepreneurs in 2013, the only historical work that had been conducted on the property was in relation the No.1 Mine, and as a result the No.1 Mine was Paringa’s initial focus.

Since the acquisition, Paringa’s US team of experienced mine engineers have secured additional coal leases, undertaken expanded drilling programs, and prepared a geological model for the entire Buck Creek Mining Complex (not just the No.1 Mine area) which led to the discovery of a section of coal to the south of the No.1 Mine area.

This discovery led to Paringa commencing technical studies on this shallow section of coal (now called the No.2 Mine) and based on the exceptional results of these studies, Paringa will now develop the low capex No.2 Mine first, followed by the No.1 Mine, as part of a staged development strategy for building a new “mid-tier”, high margin Illinois Basin coal company.

Key Reasons Supporting the Decision to Develop No.2 Mine First:

• Lower Capex: Capex for No.2 Mine of US$44 million is significantly lower than No.1 Mine of US$105 million

• Less Shareholder Dilution: Funding requirement to develop the No.2 Mine is significantly lower limiting any dilution to Paringa shareholders

• Streamlined Permitting Process: Due to the lack of new coal mine developments in Eastern Kentucky (i.e. Central Appalachian coal mines) and no requirement to secure the long lead time US 404 Permit for the initial construction of the No.2 Mine, the permitting process to start construction should take approximately 12 to 14 months

• Shorter Construction Period: With favorable geology and shallow depth of coal from surface at the proposed mine site, the construction period for the No.2 Mine is approximately 12 months (No.1 Mine is approximately 19 to 22 months)

• Enhanced Credit Metrics for Debt Financing: The shorter construction period potentially facilitates a faster repayment of any debt facility, significantly improving the credit metrics for debt financiers

As part of the first phase in developing the Buck Creek Mine Complex, Paringa will now undertake the following key steps for the remainder of 2016 year to develop the No.2 Mine:

1. Update LG&E and KU contract for the No.2 Mine
Prior to making the decision to develop the No.2 Mine first, Paringa held discussions with LG&E and KU, and has received extremely positive and supportive feedback to update the US$220 million contract for the No.2 Mine. The company anticipates formalizing with LG&E and KU the transition to the No.2 Mine over the coming months.

2. Complete Technical Studies at No.2
Paringa will now expedite the completion of remaining technical studies for the No.2 Mine. The results of the technical studies for the No. 2 Mine are expected to be released during the second half of 2016.

3. Begin Permitting Process and Secure Remaining Coal Leases
Paringa will expedite the permitting process to secure those permits required to start construction at the No.2 Mine. In addition, the company will undertake an aggressive leasing program to secure remaining coal leases. Paringa’s highly experienced US team has recently successfully completed the permitting and lease programs required to begin constructing the No.1 Mine and continues to maintain excellent relationships with all key stakeholders, including local leaseholders and landowners.

4. Debt Financing Discussions to Construct the No.2 Mine
Paringa will continue advanced discussions with debt financiers in North America, including those who demonstrated significant interest to finance the No.1 Mine, with the view to begin construction of the No.2 Mine in the June quarter of 2017.

5. Execute Additional Coal Sales Contracts
Paringa will continue to seek additional coal sales with local utilities who operate scrubbed coal fired power plants along the Ohio River Market (55 million tons of coal demand) and who are buyers of the project’s WK No.9 coal specification. In addition, the company will assess opportunities to sell coal into a secondary target Southeast Market (77 million tons of coal demand), which is a growing market for Illinois Basin coal.

With mining operations dating back to the early 1800’s, western Kentucky’s coal mining industry is one of the oldest and most extensively developed coal regions in the US. At full production, staffing for the Buck Creek No. 2 is expected to total 165 employees that are non-union, highly skilled and sourced predominately from nearby population centers.

The project is extremely well-serviced by all major mining equipment manufacturers and mine service and supply centers. Major mining equipment manufacturers have rebuild and component service exchange centers located near the proposed mine site. A major network of mining service providers including slope, shaft, and preparation plant construction companies are located in the immediate area.

To stop by Paringa’s website, CLICK HERE

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