He said coking coal prices continued to soften throughout 2014 and 2015, with around half of seaborne coking coal production reported to be operating at cash losses, and reports from China indicate up to 80% of its coal production is loss making.
“Clearly this is an unsustainable position. Announced global cuts to seaborne coking coal production, excluding China, are estimated to total 50 million tonnes per annum of capacity.
“Under the new national coal industry policy announced by China in 2014, the cuts to domestic production could be up to 60Mtpa of capacity.
“Given this response from the supply side we believe that the coking coal price is near the bottom at current levels given underlying demand appears to remain robust,” he said.
Manini said some analysts forecast insufficient coking coal supply growth to meet the needs of the global steel industry, particularly the key growth markets for Tigers Realm Coal in China and other Asia.
Manini, who runs Tigers Realm with proven mine builder Owen Hegarty, founder of Oxiana, former Norilsk Nickel executive Tav Morgan, Russian businessman Tagir Sitdekov and Anglo Coal Americas boss Craig Wiggill, wants to develop an “unparalleled pipeline of coking coal projects” that can support the company becoming one of the world’s leading coking coal producers.
Tigers Realm completed a $61 million capital raising in March 2014, which has enabled rapid progress at the project where there is now a combined coal resources at the Amaam and Amaam North deposits of 536 million tonnes, with Project F resource estimates increased by 166% to 72Mt and an initial reserve of 9.2Mt reported from drilling over the past 12 months.
It has been progressing the development of a low capital and low operating cost coking coal mine at the Project F area within Amaan North.
Following on from the pre-feasibility study in 2013 and the successful capital raising the company acquired the fully operational Beringovsky port and coal terminal located just 35km to the northeast of the Project F development location for US$5.1 million.
“Ownership of this key infrastructure, provides Tigers Realm Coal with a strong competitive advantage in that it now controls the full transport chain from mine to ship. The facility is currently undergoing upgrade work to enable the export of up to 1Mtpa of coking coal from the planned Project F mine,” Manini said.
The company has paid out $US8.5 million to acquire the equipment required for the initial mine and associated infrastructure development last year, and says it should start generating $US76 million in free- cash once full production has been reached.
The Project F bankable feasibility steady state cash costs are expected to be a low US$57.60/t FOB and close to the bottom of the coking coal cost curve.
By comparison, Queensland mines have costs between $80-100/t and the hard coking coal spot price of around $87/t today, down from $113/tonne in November.
Capital costs over the life of mine are estimated at $US133.3 million.
All that remains now is for the company to secure its final construction permits, and to award its development contracts.
And the money needs to be sorted out.
“The decision to mine and commence full scale construction of Project F remains contingent on the company securing a suitable project finance package,” Manini said.
“While the backdrop to securing the financing has been challenging, the projects compelling fundamentals have attracted solid interest from a number of potential financiers.”
The company hopes to lock in its funding next quarter, and hopes to truck its first coal by December.