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HomeMy WebLinkAboutChuitna Executive Summary 2004 CHUITNA 05-04 CHUITNA TABLE OF CONTENTS ¢ SUMMARY ¢ INTRODUCTION ¢ — CHUITNA OVERVIEW, OWNERSHIP AND DEVELOPMENT MANAGEMENT ¢ — CHUITNA GROUP, PUBLIC & THIRD PARTY PROPERTY INTERESTS ¢ BASE CASE DEVELOPMENT PLAN ¢ COAL LEASE AREA MINING UNITS, STRATIGRAPHY AND RESERVES ¢ — CHurTNA COAL MINE PLAN & FACILITIES LOCATIONS ¢ — NoRTH FORELAND COAL EXPORT TERMINAL ¢ MARINE TRANSPORT ¢ — CHUITNA COAL DETAILED COAL QUALITY SPECIFICATIONS SUMMARY This Executive Summary provides overview information related to: development of the CHUITNA PROJECT; and the quality, utilization characteristics, performance and economics of CHUITNA COAL. The technical information presented herein is extracted from comprehensive and detailed engineering and economic evaluations prepared by either third party contractors or parties with no equity interest in the CHUITNA PROJECT. Detailed information and data, including listings of supporting technical documents and information, are available upon request by qualified interested parties. For more information contact PACRIM COAL Attention: R.B. Stiles 711 “H” Street, Suite 600 Anchorage, AK 99501 USA Phone (907) 276-6868 Fax (907) 276-2395 Email: rbstiles@gci.net INTRODUCTION The Cuurrna Group, doing business as PACRIM CoaL, intends to develop the CHUITNA Project and market and export CHUITNA COAL to utilities and Independent Power Producers in the Northern Pacific Rim of Asia; the west coast of Mexico: and the western US states of Hawaii and Washington. This Executive Summary provides potential customers and other interested party's summary information regarding: ¢ Market and Project development goals and objectives; * The Owners/Developers of the CHUITNA PROJECT; ¢ The extensive proven coal reserves of the CHUITNA PROJECT; * The scope, timing and estimated investment costs of a Base Case Development Plan, * The CHurtNa Coa MINE and other elements of the CHUITNA PROJECT. Market and Project development goals and objectives are presented in this section: all other information is presented in subsequent sections of this Executive Summary. NEAR-TERM GOALS & OBJECTIVES MarKET: Secure commitments for adequate tonnage’s to justify implementing the Base Case Development Plan. Progect: Develop a coal export project, the scope of which is consistent with the characteristics and practices of the market and the required investment and operating cost are such that the CHUITNA PROJECT yields an acceptable rate of return when CHUITNA COAL is competitively priced in export markets. LONG-TERM GOALS & OBJECTIVES Market: Capture a 5% or greater market share of the incremental growth in steam coal demand in the Northern Pacific Rim of Asia, a share of the expanding markets in Mexico and Hawaii; and a share of the existing market in Washington State. Prosect: Expansion of coal production and exports to the optimum production potential (10-12 MMtpy) of the CHUITNA COAL reserve. EXECUTIVE SUMMARY CHUITNA & Vv VIEW WNERSHIP & DEVELOPMEN CHUITNA PROJECT The CHUITNA PROJECT is a greenfield coal export development located in the Beluga Coal Field of Southcentral Alaska, approximately 80 kilometers west of Anchorage. CHUITNA PROJECT GENERAL LOCATION The Project is based on the exploitation of a 1,000,000,000 tonne, ultra low sulfur, subbituminous coal resource, the center of which is less than 20 km oes from the coast of the Cook Inlet. i i ~ The scope of the CHUITNA PROJECT includes four (4) distinct but related developments: ¢ ~~ Chuitna Coal Mine ¢ ~Chuitna Development Road System ¢ North Foreland Coal Export Terminal ¢ Personnel Housing & Transport System and two (2) operations: a coal transport operation and a road maintenance operation Shown in Chui ject Gene tion are: © Chuitna Group Area of Interest and the location of the Chuitna Group Coal Lease Area (8,200 hectares); ¢ Chuitna Group Ladd Landing Lease Area (360 hectares); ¢ ~~ Chuitna Development Road System (approximately 20 km); ¢ —Chuit River Road (approximately 10 km); e North Foreland Industrial Development Area site of the prospective North Foreland Coal Export Terminal. (UITNA OWNERS) D NT MANAG! T The Chuitna Group owns the Chuitna Project. The Chuitna Group is a combination of the Bass interests and the Hunt interests, both of Dallas, Texas. A Hunt interest is the designated operator of the property and DRven Corporation is the contract development manager. EXECUTIVE SUMMARY CHUITNA Cote COAL CHUITNA GROUP, PUBLIC & THIRD PARTY PROPERTY INTERESTS CHUITNA GROUP PROPERTY INTERESTS The CHUITNA Group holds five (5) contiguous coal leases (approximately 20,600 acres) in the Beluga Coal Field of Southcentral Alaska. These State of Alaska leases grant to the CHUITNA GRouP, for an indeterminate term, the exclusive right to extract the coal from the Coal Lease Area. In addition to annual rentals, the State assesses a production royalty equal to 5% of the Adjusted Gross Value! of the coal sold and a Mining License Tax equal to 7% of the net profits at the Mine. The CHUITNA GRovP also holds a multi year option to lease approximately 800 acres at Ladd Landing. The Ladd Landing Lease Area provides direct access to both the Public Beach Access area and to the State owned tidelands. The PAN AM RoaD, constructed within a public right-of- way, provides access between the Ladd Landing Lease Area and Coal Lease Area and connects with the CHUITNA RIVER ROAD. The CHUITNA GROUP has had numerous discussions with the Tyonek Native Corporation (TNC) regarding obtaining: e Rights to use of the CHUIT RIVER ROAD, e Rights to a site for an uplands coal terminal within the North Foreland Industrial Development Area, e An easement/right-of-way for an overland conveyor across TNC lands. The CHUITNA GROUP and the TNC are in general agreement, that when appropriate, a reasonable arrangement will be reached providing the CHUITNA GROUP the use, lease and easement rights needed to develop and operate the coal export terminal at North Foreland. SURFACE AND MINERAL OWNERSHIP Shown in the adjoining figure are the various owners of the surface and mineral estates within and adjacent to the CHUITNA PROJECT area. CHUITNA GROUP coal leases and Ladd Landing lease area are shown in yellow. <S) Mental Health Trust (Surface & Mineral) SURFACE AND MINERAL OWNERSHIP \ uS Land Status Legend e v _ Tyonek Native Corporation (Surface Only) \. Kenai Peninsula Borough (Surface Only) Private (Surface & Mineral) State of Alaska (Surface & Mineral) Chuitna Group Property SS s —— Public Road/R-O-W ph. ——— Private Road/R-O-W EXECUTIVE SUMMARY CHUITNA DEVELOPMENT Gao ae) BASE CASE DEVELOPMENT PLAN BASE CASE DEVELOPMENT SCOPE The overall scope of the Base Case Plan entails the development of a 3 MMTon/yr coal production and export project consisting of the following facilities: ¢ CHuITNA COAL MINE (¢CCM): A 3 MMTon/yr installed capacity surface coalmine with associated Surface Facility Complex, Mine Access Road, and Air Strip Facility. * CuuITNA DEVELOPMENT ROAD SYSTEM (*CDRS): 1) Upgrade of the existing + 11 mi/18 km. PAN AM ROAD between Ladd Landing and the CHurITNA Group Coal Lease Area boundary; 2) Upgrade of the existing + 6.8 mi /11.3 km. CHurtNa RIVER RoaD between THE PAN AM RoabD and a coal terminal at North Foreland; and 3) Development of a barge landing and equipment and material storage area at Ladd Landing (LADD LANDING FACILITIES). * COAL TRANSPORT CONVEYOR SYSTEM (*CTCS): A 60,020 ft./18.3 km long by 48- inch/1.2 m wide covered overland conveyor with associated service road. * PERSONNEL HOUSING & TRANSPORT SYSTEM (*PHTS): A Construction Camp and a 100 person single status-housing complex for the permanent workforce with temporary housing facilities for an additional 25 personnel. * NorRTH FORELAND CoAL Export TERMINAL (¢NFCXT): Upland facilities and equipment associated with receiving, open storage, and reclaiming coal and marine facilities and equipment associated with coal conveying and ship loading at rates of 2,500 to 3,000 Tons/hr. Minimum offshore usable draft 15 to 18 meters. This element would be developed as either a stand-alone project or as part of an integrated dry bulk shipping and receiving facility. Estimated investment costs for this project are not included in the table of Estimated Investment & Working Capital cost. Total development, construction and equipping cost for this project are estimated to be +$50,000,000. In addition to the facilities listed, the scope of the Base Case Plan includes the following operations, one or more of which may be contracted to third parties: * Personnel Transport & Personnel Housing Operations; * CHUITNA DEVELOPMENT ROAD SYSTEM Maintenance; As shown in the Base Case Development Schedule, first exports shipments are projected to begin approximately 36 months after a Go DECISION is made. This is a conservative schedule estimate and can probably be shortened to 30 months or less. BASE CASE DEVELOPMENT SCHEDULE YEAR Final Engineering & Permitting Go DEcIsion Contracting & Procurement Development *CHUITNA COAL MINE Dragline Procure & Erect *CDRS Development *CTCS Development *PHTS Development *NFCXT Development Production & Export 900,000 Tons 1,800,000 Tons 3,000,000 Tons BASE CASE DEVELOPMENT INVESTMENT. The investment and working capital required to develop the Base Case Scope Project, net of any investment in the NoRTH FORELAND COAL TERMINAL, are shown in the following table. ESTIMATED INVESTMENT & WORKING CAPITAL ($1,000’s) Through Ist Yr. Through Ist Yr. Investment or Expenditure of Production @3.0 MMTpy_| CHUITNA GROUP DEVELOPMENT OVERHEAD 3,400 3,400 CHUITNA COAL MINE 87,200 127,300 | CHUITNA DEVELOPMENT ROAD SYSTEM 7,700 7,700 | COAL TRANSPORT CONVEYOR SYSTEM 42,300 42,300 PERSONNEL HOUSING a 10,800 10,800 | - Total Investment 151,400 191,500 | Working Capital __ 7,500 — 14,000 | | Total Investment & Working Capital 158,900 205,500 Note: All estimates are as of late 2004 EXECUTIVE SUMMARY CHUITNA Ga q COAL CHUITNA COAL LEASE AREA E ORATION, GEOLOGY & RESERVES The geologic structure of the Chuitna Coal Lease Area is divisible into three (3) mine development areas or Logical Mining Units (LMU). Except for use of common surface facilities, each Logical Mining Unit can be independently developed. Mine planning has focused on initial development of LMU_1. The boundaries and general stratigraphy of each LMU along with the location of 483 boring sites (representing 510 coal borings) are shown below. LEASE AREA LOGICAL MINING UNITS, GENERAL STRATIGRAPHY & BORING SITES (Stratigraphic columns not to scale + Pre-1980 Coal Boring — @ 1980 Coal Boring reek ‘e IN LIMIU 3 Losicat Mining Unit LMU Boundary Geotech/Coal Boring] 82 & 86 Rotary Coal Boring — @ 1/82 & 86 ‘ore EXPLORATION & RESERVES Approximately 510 coal borings have been drilled, logged, mapped within, and adjacent to the Chuitna Coal Lease Area with eight coal horizons being identified and assigned names (brown, yellow, green, blue, red & purple). The eight (8) feasibility phase and two (2) development phase drilling programs focused on LMU_1 and LMU_2, with less intensive drilling in LMU_3. Analysis and interpretation of data collected during these drilling campaigns form the basis for comprehensive geologic computer modeling and seam correlation for that portion of the lease area lying north of the Chuit River. Average drill hole spacing within LMU_1 and LMU_2 is sufficiently close (300 m centers or less) to allow characterization of these reserves as “proven”, whereas reserves within LMU_3 are characterized as “indicated”. In-Situ Coal Reserve Summary Mining Area Reserves inl, 000,000 tonnes Unit Acres Hectares Proven | Indicated Total LMU_1 9,650 3,860 655 655 LMU_2 2,500 1,000 154 154 LMU_3 8,350 3,340 254 254 Total | 20,500 8,200 809 254 1,063 LMU_1 MINEABLE & RECOVERABLE RESERVES Mine planning efforts, focused on initial mine development within LMU_1, have produced the projected mining limit shown in the adjacent figure. LMU_1 represents approximately 47% of the Coal Lease Area and contains approximately 81% of the proven reserves within the Chuitna Coal Lease Area. Coal production within the LMU_1 would come from the five (5) uppermost seams (Green, Blue, Red_3, Red_2 and Red_1) and, as shown in the following table, would result in the recovery of approximately 300,000,000 tonnes or approximately 46% of the in-place reserves within LMU_1. LMU_1 Mining Limit Economic Reserves | MINEABLE RECOVERABLE COAL Waste Coal Waste Coal % of Total SEAM (10° m*) (10° tonnes) (10° m*) (10° tonnes) | Recoverable Green 21 5 21 5 1.7% Blue 257 50 260 47 15.7% Red_3 357 71 360 68 22.7% Red_2 437 119 442 114 38.0% Red_l 98 70 102 66 22.0% Total 1,170 315 1,185 300 100.1% EXECUTIVE SUMMARY CHUITNA Ga q roryve CHUITNA COAL Mine planning efforts have focused on initial mine development within LMU_1. LMU_1 represents approximately 47% of the Coal Lease Area and contains approximately 81% of the proven reserves within the Coal Lease Area. The general layout of the CHUITNA COAL MINE and the location of on lease and adjacent facilities are shown in the following figure. MINE GENERAL LAYOUT & MAJOR FACILITIES CHUITNA Coat LEASE AREA 7 ff Prima LMU_Y * Crusher Mining Limr 4 +t co “Ss We : . 3 7 ; a J y s ¥ 3 ‘toa tend 4 A 7 4 Fi ye i O12 4 { km , oi 2 t si mi Reset Area Won. Tl “Mine-Access_ ‘a Airstrip 7 Area %, \3 Ms, %, eo, Work Force Housing Area a, ©, O bane rec ‘e, 1 — ye a. ! Wetec 1 \ / PANAM Road —s/ (upgraded & realigned) Mining progression is essentially across dip and results in year-to- year mining ratios of approximately 4:1 (m*/tonne) average mining ratio for the entire LMU_1 Mine Plan Area. PLAN & FACILITIES LOCATIONS ECONOMIC RESERVE SUMMARY LMU_1 MINE PLAN AREA MINEABLE RECOVERABLE = a = aa COAL Waste Coal Waste Coal SEAM __| (10° m’) L (10° tonne) | (10° m’) | (10° tonne) Green 21 5 21 5 Blue 257 50 260 47 Red_3 357 71 360 68 Red_2 437 119 442 114 Red_1 98 70 102 66 | Total 1,170 315 1,185 300. | MINING OPERATION The initial boxcut development and the first two years of overburden and coal mining will employ a truck and shovel mining method. Erection of a large dragline will begin during the first year of production with the dragline being placed in operation by the end of the second year of production. Once in operation, the dragline will be the primary overburden-mining machine. Coal will continue to be mined using a combination of a shovel and excavators and hauled by truck to a primary crusher/breaker located close the active mining area. The sized coal will be conveyed from the primary crusher to a secondary crusher and stockpile area located within the Surface Facilities Complex in the Shop Office Area. MINE FACILITIES The scope of the CHUITNA COAL MINE Base Case Development includes development and construction of several major facilities in addition to development of the initial Mining Area and Overburden Stockpile. These facilities (locations shown on the adjacent figure) include: ¢ Mine Access Road Mine Conveyor Mine & Overburden Haul Roads Surface Facilities Complex Airstrip Facility The site of the main Construction Camp Facility /Work Force Housing Facility (elements of the PERSONNEL HOUSING & TRANSPORT SYSTEM) along with the general alignment of the coal transport conveyor and the realigned and upgraded Pan Am Road are also shown. EXECUTIVE SUMMARY CHUITNA Ga eer NORTH FORELAND COAL EXPORT TERMINAL NORTH FORELAND COAL EXPORT TERMINAL GENERAL LAYOUT “NorTH FORELAND Loe AREA BOUNDARY Cape Class Berth Location wo Note: The red background of the onshore area and deep blue background of the off shore area is a false color infrared aerial photo superimposed on a USGS map. EXPORT TERMINAL SITING Three areas (Granite Point, Ladd Landing and North Foreland), all approximately the same straight-line distance from the center of the Chuitna Coal Lease Area, have been evaluated as potential sites for a coal export terminal. Only the Ladd Landing and North Foreland areas have an existing road connection with the Chuitna Coal Lease Area; and the North Foreland area offers the additional advantage of an existing trestle extending +1,500 ft. off shore and the shortest offshore distance to deep water. General layouts, preliminary designs and engineering economics associated with a 10,000,000 tonne/yr coal export terminal have been developed for all three sites, the general layout for an coal export terminal at North Foreland is shown on the adjoining figure. COAL TRANSPORT MINE TO NORTH FORELAND Coal will be transported from the Mine to the North Foreland Coal Export Terminal via a 12-mile long, 48” wide overland conveyor. Coal could also be truck hauled (approximately 18 miles) using upgraded existing roads. EXPORT TERMINAL DESCRIPTION The boundary of the upland area encompasses approximately 340 acres (140 hectares). As shown on the adjoining figure the upland facilities will consist of: 1,000,000 tonne capacity Coal Storage Area Yard Conveyor & Stacker /Reclaimer Lay down & Temporary storage Area Shop & Office structures Bulk Fuel Storage & Distribution Heliport Truck Coal Dump & Reclaim System Surface Water Management System Off shore, the existing 1,500 ft. approach trestle will be extended 1,500 ft for a Panamax Class or 3,000 to 3,500 ft. for a Cape Class draft berth. The coal will be conveyed to a 3,000 tonnes/hr. shiploader. The 3,000 tonnes/hr shiploader is capable of loading a Panamax Class (60,000 DWT) vessel in approximately 24 hours and would provide for an annual throughput capacity of + 10,000,000 tonnes. EXECUTIVE SUMMARY CHUITNA MARINE TRANSPORT The approximate marine transport distances from the proposed NORTH FORELAND COAL COOK INLET NAVIGATION & OPERATIONS TERMINAL to various CHUITNA COAL markets are shown in the following figure. Also In addition to the major marine terminals and ports, several small boat harbors, shown are the locations of major Southcentral Alaska marine terminals and ports. commercial vessel terminals and barge landing sites are located within the Cook Inlet. SOUTHCENTRAL ALASKA PORTS & MARINE TRANSPORT ROUTES All the major Cook Inlet marine terminals and ports operate on a year-round basis and, with the occasional exception of the Port of Anchorage, all berthing and unberthing operations are conducted without the assistance of tugs. Container vessels, oil and LNG tankers, dry bulk carriers, work boats and barges (tug towed) navigate the Cook Inlet CnurrxaGrour Area of Interest. ~ a year-round. COALTERMINAL NORTHFORFLAND « Nippon Yusen Kaisha (NYK) and others have evaluated the feasibility of operating large coal carriers (Panamax & Cape Class ) in the Cook Inlet. These various evaluations, Drift River Oil Terminal conducted in the 1980's, reached the following general conclusions: e The Cook Inlet is navigable year-round and winter ice conditions are not considered severe enough to require Ice Class rated vessels. e Unassisted berthing and unberthing operations are considered practical; however, bow thrusters would be recommended for winter operations of Cape Class vessels. e Tides (+ 10 meters) and currents (6-8 knots) are a consideration but present no special problems given a properly designed and constructed berth and properly planned and implemented operating procedures. ¢ Vessels for this service are available on the open charter market. EXECUTIVE SUMMARY CHUITNA COAL DETAILED COAL QUALITY SPECIFICATIONS & UTILIZATION PARAMETERS COAL QUALITY UTILIZATION & PERFORMANCE PARAMETERS. The detailed coal quality specifications presented herein were compiled from the Heating Values (HV), Ash Fusion Temperatures (AFT) and Hardgrove Grindability laboratory analysis of approximately 81 coal core holes. Except for Ash Fusion Index (HGI) were determined by laboratory analysis of composite tonnage-weighted Temperatures (AFT) and Hardgrove Grindability Index (HGI), all specifications are samples. All other Utilization and Performance Parameters listed in the following tables tonnage-weighted averages for the recoverable coal within the LMU_1 Mining Limit. were calculated using the tonnage weighted average quality. Each core hole intercepted at least three and as many as five of the recoverable coal seams. UTILIZATION PARAMETERS Dry ULTIMATE Dry PROXIMATE Parameter Units Value Parameter Units Vane Heating Value @ Total Moisture 4,250 kcal/kg 7,650 Bulb — % oll Ash % 13.9 Heating Value @ Inherent Moisture 4,890 kcal/kg 8,800 Btw/lb peabiay 7 a Vat, 7 * SO, Emissions/Unit of Heat Input 0.58 mg/kcal 0.34 1bMMBtu | Chlorine % 0.02 Heating Value BTUMb 10,485 Inherent NO,/Unit of Heat Input 5.91 mg/keal 0.95 Ib/MMBtu | Oxygen % 19.6 Heating Value kcal/kg 5,825 Ash/Unit of Heat Input 23.9 mg/keal 13.5 lb/MMBtu Sulfur % 0.17 ASH MINERALS Total Moisture (%) | 27.1 27.1 | TRACE ELEMENTS (PPM) P. oer Units Value Fuel Ratio (Fixed Carbon/V olatile Matter) 0.90 0.90 | Element Average High Low SiO, % 41 ‘Antimony 035 0.50 030 ALO, % 202 PERFORMANCE PARAMETERS Arsenic 2.16 3.00 2.00 TiO, % 13 Expected Performance CHUITNA COAL | Beryllium 0.40 1.00 0.10 Fe,0, % 89 Parameters Units Good Poor Value | Boron 8.13 11.00 7.00 CaO % 13.4 SLAGGING INDICES paaers 0.65 1 —- MgO % > Base/Acid Ratio - below 0.25 0.25-0.80 0.47 | Cadmium 0.66 ~ bed EO % ul Iron/Calcium Ratio - below 0.30 030-3.00 0.66 | Chromium 9.36 18.00 6.00 Na,O % 1.6 FE,O. % below 12 above 25 89 Cobalt 0.95 1.60 0.70 Mn,O, % 0.1 “et . A : Copper 1.67 9.00 8.00 BaO % 08 Silica/Alumna Ratio - low value high value 2.03 | Fluorine 162,50 240.00 180,00 S10 % 03 % Dolomite % high value low value 60 Germanium 022 030 0.20 $0, % 25 AFT-Hem:Red °C above 1,232 below 1,232 1,210 Todine 0.46 0.60 0.40 P.O, % 1 Silica Ratio - high value low value 0.61 | Lead 3.30 4.00 2.00 Undetermined % 3.7 Slagging Factor °C above 1,343 below 1,150 1,151 | Lithium 5.72 8.00 4.00 ASH FUSION TEMPERATURES _ FOULING INDICES - | Manganese 92.28 185.00 35.00 Reducing °C °F Na,O % below 2.0 1.6 | Mercury 0.06 0.07 0.06 Initial 1,166 2,130 Na,O + K,0 % below 3.5 27 | Molybdenum 1.72 2.00 2.00 H=W 1,182 2,160 Chlorine % below 0.2 0.02 | Nickel 4.16 5.00 3.00 H=1/2W 1,210 2,210 AFT-Hem:Red °C above 1,232 below 1,232 1,210 Selenium 037 1.20 0.20 Fluid 1,243 2,270 ESP PERFORMANCE Silver 0.14 030 0.10 Oxidizing °C °F Basic % below15 | above 40 29.1 Strontium 153.00 200.00 160.00 Initial 1,232 2,250 Basic/Na,O Ratio - below 20 above 30 18.2 ‘Thorium 2.58 3.00 3.00 H=W 1,249 2,280 K,0 % below 1 Ll ‘Tin 0.56 1.10 0.50 H=1/2W 1,271 2,320 CaO + MgO % above 20 17.5 ‘Tungsten 0.04 0.09 0.00 Hid 1,304 2,380 OTHER INDICES — Lieneisae: ze ae 2.00 MOISTURE. Abrasion Index - below 10 above 20 99 Venediemn 22.38 33.00 740 Total (Equilibrium) % a Pulverizing HGI : above 50 below 50 32-35 Zinc 3.98 13.00 3.00 Air Dried (est.) % 19 Zirconium 15.28 21.00 15.00 Inherent % 16 EXECUTIVE SUMMARY