The purchase agreement requires that Thelon will pay $US1 million on signing and $3 million in cash March 25 of next year. It will also take over Clear Fork’s debt obligations of $4.8 million.
The Toronto Stock Exchange approved Thelon’s May 18 letter of agreement to purchase the Tennessee project late last month.
"The purchase of the Jellico project and its production is an important milestone for Thelon, as we build the company into a premier producer in the coal industry,” Thelon president Jason Walsh said.
The Jellico project is located on 6350 acres in Campbell and Claiborne counties, Tennessee.
Kentucky private contractor Mountainside Mining entered into a lease agreement with Clear Fork in March 2006 to mine 640 acres of Jellico. It mined a total of 185,600 tons of compliant coal in the 2010 fiscal year, from which Clear Fork earned $1.1 million in royalty payments.
Output increased throughout the year, and Mountainside Mining said 2011 production would continue to rise while additional tons were added under permit. In total, there are 3 million tons of coal under permit, equal to a lifespan of eight years.
The entire Jellico project encompasses a minimum of 13Mt of high-quality thermal and metallurgical coal, according to a 2009 report by AR Leamon. As that report was not compliant with NI 43-101 standards, Thelon said earlier this year it would confirm and expand the reserve and file a compliant report.
“Coal quality analysis conducted from coreholes and test pits on the property between 1992 and 2007 have shown favorable sulfur, ash and Btu values consistent with high-quality metallurgical coals being produced in the area,” the company said.
Jellico has well-established power, logistics and transportation in the area, including mine access roads and a railroad that runs parallel to state highway 90.
With the acquisition, Thelon has added Clear Fork’s William Cousins to its advisory board. The longtime Appalachian coal veteran will be managing director of Clear Fork Mining.