The deal includes an open-ended lease between Safeco and NAG for the 19-acre Cobra Facility, also known as the Cobra Tippling Production Plant, which will become a central operation and distribution point for the producer. The facility will crush, screen and wash as well as allow the company to purchase outside product for blending.

Additionally, the facility will be serviced by CSX railroad, and enough rail capacity exists to accommodate the loading of unit trains (110 railcars), which in turn will help the company realize more favorable rates.

The first coal to run through Cobra will be from North American Gem No. 1, an auger/highwall operation with an average 3-foot (91cm) height from the Jellico seam. Formerly referred to as the Bays Hollow complex, the permit for the No. 1 mine is complete and will be transferred upon bond posting.

“Based on the thickness of the coal seam, auger mining can produce 4000-6000 net tons per month with an increase to plus-20,000 net tons per month if highwall mining techniques are commenced,” NAG noted, adding that production from the permit should last between 12 and 18 months.

Samples pulled from the complex on August 26 reflect an ash range of 2.27-4.67%, 0.79-1.1% sulfur, and 13,656-13,996 BTU. At less than 10% ash, less than 1% average sulfur and greater than 12,500 BTU, initial coal sales offers are $US58/ton effective immediately, for up to 30,000 net tons monthly.

“This price is approximately $6-8/net ton higher than prices quoted earlier in the summer,” NAG said, noting that the mine has the potential to help the company establish itself as a coal producer and enter into supply contracts.

“The supply contracts established by production from the North American Gem No. 1 mine permit are expected to be expanded upon as the company increases operations in the area.

“The performance and capabilities of production from the … permit will determine the point at which further production from additional leases is commenced,” the company said, pointing out that the mine life and production level expectations were made without a feasibility review – therefore, the mine’s future will hinge on economic conditions.

Based in Vancouver, North American Gem has a coal focus in North America, specifically Saskatchewan, Kentucky and West Virginia.