The Vancouver-based company said that it will confer the unnamed holder of the Arkansas leases with capital totaling $US50 million in exchange for its 50% stake in the project. Half of that will be earmarked for surface production and the balance will be used to produce the project’s underground phase.
Velocity also said it will have preferential right to 90% of the project’s cash flow until repayment of the capital and a cumulative 40% return is achieved. Once that milestone is met, the two will share cash flow equally.
The partner has projected development costs for the surface portion, at a rate of 35,000 tons monthly, to be $24.6 million. Some $25 million is estimated to be needed for the underground segment; however, management noted that while historical data and feasibility studies have been reviewed, it has not yet conducted an independent assessment of the deposit or confirmed the terms or costs.
“The project is a historical metallurgical coal deposit with an exposed highwall from previous surface mining,” Velocity said.
“The lessee is proposing starting production with … operation[s] that will focus on the highwall and then go underground.”
A non-National Instrument 43-101 (NI 43-101) compliant resource and reserve calculation completed in 2008 has outlined about 1.386 million tons and 975,333t, respectively, at the project’s highwall portion.
Additional data also suggests additional potential met tonnage that may come from the project’s surface segment that could bring that total to about 2Mt.
In addition to the surface-accessible portion of the deposit, the historical data also projects a further deposit of approximately 21Mt for underground extraction. That estimate is also not part of a NI 43-101 compliant report.
Velocity will serve as manager of the newly-incorporated Arkansas limited liability company, and officials noted its obligation for funding the project hinges upon the receipt of title, tonnage, grade and feasibility as well as project permitting. It has a 12-month due diligence period to obtain the needed confirmations.
In addition to the new coal project, the company has two Cassiar, British Columbia molybdenum properties, gold prospects in Idaho, and several other mining opportunities in North America.
