8th Mar 2016 10:08
LONDON (Alliance News) - Prairie Mining Ltd Tuesday said the pre-feasibility study conducted on the Lublin coal project in eastern Poland has confirmed the operation can be developed and deliver "robust economics," claiming the project will assist in boosting Europe's energy security.
"The pre-feasibility study has confirmed the potential to develop a world scale, multi-generational coal mine with strong cash flows. In fact, we expect that the Lublin coal project would be the lowest cost global supplier of coal into Prairie's key regional European target markets," said Chief Executive Ben Stoikovich.
The study estimates the project would have an average operating cost of around USD25 per tonne of coal, selling over 6.3 million tonnes a year to deliver an average of USD348.0 million in annual earnings before interest, tax, depreciation and amortisation over a 24-year mine life.
The coal within the resource at the project is diverse as the company has the opportunity to produce "exceptionally low" ash semi-soft coking coal and premium coals for the power generation sector, as well as a range of sized coal for households and industrial coals.
Europe seems to be the company's primary market, accessing that by rail, but Prairie said it also has access to the seaborne export market through underutilised ports in the north of Poland.
However, the project will come at a substantial cost. Prairie said total capital expenditure for Lublin is expected to amount to USD558.0 million.
Breaking that figure down, USD233.0 million is needed to sink the shafts in the mine, USD188.0 million is needed for other underground development work and the remaining USD136.0 million will be spent on coal processing and surface activities.
Importantly, Prairie said it will need an additional USD74.0 million for engineering, procurement and construction management costs, and further funds for contingencies, pushing the total cost of the project up to USD662.0 million - excluding the planned contingency funds.
The project also has expansion opportunities to build on the current marketable ore reserve of 139.1 million tonnes by developing and including the inferred resource of 87.0 million tonnes.
Prairie said European industry continues to consume more than 300.0 million tonnes of hard coal each year, and highlighted the ongoing concerns over energy security within the continent.
"We expect this will become even more important given the ever increasing concern over the security of energy supply, particularly for Central Europe," said Stoikovich.
Prairie shares were untraded on Tuesday, last trading at 9.5 pence per share.
By Joshua Warner; [email protected]; @JoshAlliance
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