Hogsback and return of the boom

Hogsback reckons there’s a boom coming and it may – or may not – be coal. What it will definitely be in is pre-feasibility study generation.
Hogsback and return of the boom Hogsback and return of the boom Hogsback and return of the boom Hogsback and return of the boom Hogsback and return of the boom

Lou Caruana

Never has Hogsback seen so many coal mining companies dusting off their PFSs and getting an update to reflect the current high coking coal price of more than $US300 per tonne.

Yes, the coking coal price has been soaring to levels not seen since 2011, and yes there have been even some reports of spontaneous partying breaking out. And good too. No one likes a sad sack. As any underground coal miner will tell you, spontaneous celebration is infinitely more preferable than spontaneous combustion.

It is hard to believe that little more than 12 months ago, Isaac Plains was a pain in the rear end of the hapless Brazilian Vale group.

How things have changed since Nick Jorss and his team at Stanmore Coal took over and opened a revamped open cut dragline operation in Queensland’s Bowen Basin.

Not only that, Stanmore is starting to dream about new Isaac Plains spin off projects.

Concept mining studies of Stanmore Coal’s mooted Isaac Plains underground coal project indicate that a bord and pillar operation is the most viable option for the Queensland mine, as the company explores options beyond its existing open cut mine.

Further exploration activities are planned in 2017 to de-risk the project.

Stanmore said it was also seeking to de-risk its planned nearby Isaac Plains East open cut project.

The coal from Isaac Plains East has improved coking properties and coking fraction compared to its existing Isaac Plains operation.

It must be a great luxury to be in the position of de-risking coal projects. So many concepts and ideas need PFSs. 

Over in North America, a similar phenomenon is occurring.

Jameson Resources has started updating the PFS for its Crown Mountain Coking Coal Project in Canada due to the improved economics brought about by the change in coal prices and currency fluctuations.

For example, the original PFS assumed a CAD:USD exchange rate of 0.92 and that rate is now below 0.75, creating significant advantages for a Canada-based operator.

The original PFS evaluated three operating scenarios and produced pre-tax net present value in a range of $US371-$410 million, and internal rate of return from 33% to 61%, at coal prices well below those prevailing today.

That would seem a tad conservative in today’s heady atmosphere. So back to the drawing board boys – time to update the PFS.

Not only have planned projects been given a ray of hope, existing operating mines that were destined for a quick sale or the chopping block have been given a second wind.

Anglo American’s proposed sale of its “non-core” coal business, which includes the prized Grosvenor and Moranbah North mines, is taking a lot longer than the market initially thought.

The coking coal rally came just at the right time and one by one the prospective bidders have fallen away with the BHP Billiton Mitsubishi Alliance firming as favourite to be the ultimate buyer.

However, along the way there would have been a lot of number crunching, scenario mapping, and assorted tyre kicking by our friends in the PFS generation industry to see how the operations stack up.

Good times all round for the PFS crowd.         

Hogsback sees a future when more and more PFSs will be produced for some worthy projects that never stood a chance of seeing the light of day just 12 months ago.

This will make for good times at mining consultants offices around the country. They might be more willing to break out a few cold ones this Christmas. Who knows, Hogsback might even get an invitation.