Joint venture partner and 25% stakeholder Erdene Resource Development noted the opportunity to advance the project was improving with the growing prices of coking coal.

“Currently, the prefeasibility is considering a room and pillar continuous miner coking coal operation,” Erdene said.

“However, should the initial underground program confirm acceptable conditions and sales and marketing research confirm sufficient demand for the Donkin product, it is possible the project could eventually convert to a longwall operation.”

Located on Cape Breton Island in the eastern province of Nova Scotia, the project is targeting 2.75 million tonnes per annum of semi-hard coking coal exports.

Plans include the development of an onsite coal handling and processing plant, and transportation will either be via a barge to ship system or by rail to Nova Scotia’s Sydney Harbour.

The project was originally aiming for 4Mtpa of production for domestic and export markets, but local utility Nova Scotia Power decided in late 2009 it would not take coal from Donkin.

An independent marketing study is underway which is expected to take two to four weeks.

More than $100 million of development was previously spent on the project by the Cape Breton Development Corporation.

Since Xstrata and Erdene took over in late 2005, the JV has worked to dewater and maintain the 3.5-kilometre twin access tunnels.

Donkin has 227Mt of indicated resources and 254Mt of inferred resources.

The coal is a high-volatile A bituminous type with high sulfur and medium ash content.

The resource lies under the sea floor in the Sydney coalfield and the Donkin block is accessible from the north coast of Cape Breton.

Xstrata owns 75% of the project.

Cape Breton’s coalfields historically served the European and North American steel industries, and lie close to major shipping routes and deep water off the coast.