Montem Resources Corp’s (ASX:MR1) scoping study on the Chinook Coking Coal Project in the Crowsnest Pass area of Alberta, Canada, indicate an economically and technically viable project with upside justifying progressing to a pre-feasibility study (PFS).
The results of the scoping study identify the potential to realise cash flow from surface mining within the Chinook Project.
On the strength of that study, the company will now execute plans to conduct additional drilling, engineering and environmental work to produce a PFS for Chinook.
Multi-mine hard coking coal producer
Montem managing director and chief executive officer Peter Doyle said: “We are pleased to have completed this scoping study, which identifies the potential to realise cash flow from surface mining within the Chinook Project.
“We have focused on Chinook as it sits in Category 4 lands and has the advantage of brownfield development.
“The board believes the positive result from the scoping study underscores our potential to be a multi-mine hard coking coal producer.
“We will now execute plans to conduct additional drilling, engineering and environmental work to undertake a PFS for Chinook.”
Leverages on existing infrastructure
The scoping study is an early-stage technical assessment of the Chinook Project and was undertaken as a desktop exercise by specialist consultants, including RPMGlobal and Sedgman Canada Ltd.
The 2021 Chinook Project scoping study expanded on earlier conceptual mine planning work completed by Montem in 2018 and 2020 and identified multiple zones of low-ratio mineable hard coking coal, suitable for open-cut mining
The study leverages on existing rail, power, and road infrastructure adjacent to the project.
As the proportion of indicated resources underpinning the engineering study is less than 70%, the resulting financial analysis of the study is not able to be released to the market, in accordance with regulatory requirements.
Chinook Project mine financing is planned to be achieved through a mix of equity and debt.
The equity portion is planned to be sourced from cashflow expected through the sale of coal from the Tent Mountain Mine.
Montem is undertaking a restart at the Tent Mountain Mine, with planned coal sales beginning in 2022/2023.
The Chinook Project is expected to start about five years after the Tent Mountain Mine re-start.
An assessment of various funding alternatives for the Chinook Project has been made based on precedent funding transactions in the coking coal mining industry and there is a reasonable basis to believe that requisite future funding for development of the Chinook Project will be available when required.
Global debt and equity finance availability for high-quality coking coal projects remain robust.
Preliminary talks with financial advisers
Montem has conducted preliminary discussions with financial advisers with proven track records of raising equity and debt financing for the construction of new coal projects, giving the company confidence that the project has a reasonable likelihood of being financed.
It has also conducted preliminary discussions with financial institutions capable of financing up to 100% of the construction cost, again providing confidence the project has a reasonable likelihood of being financed.
Also, Montem has conducted preliminary discussions with potential offtake partners concerning the option of significant pre-sale financing to again add confidence the project has a reasonable likelihood of being financed.
Montem has a current market capitalisation of about $49 million with an uncomplicated, clean corporate and capital structure.
It also owns 100% of its five steelmaking coal projects in the Crowsnest Pass area of Alberta.
Further, 100% of the forecast HCC production from Montem’s projects, including the Chinook Project, remains uncommitted.
These factors are expected to be highly attractive to potential strategic investors, offtake partners and conventional equity investors.
They also deliver considerable flexibility in engagement with potential debt or quasi-debt providers.
The 2021 scoping study, 2020 resource estimate and 2020 coal quality assessment all provide outlines of required work to better understand the Chinook Project.
Immediate work programs Montem is focusing on are associated with the gathering of extensive amounts of information to develop a better understanding of the surface and subsurface conditions of the project site and its coal seams.
These work programs will comprise geological exploration for resource upgrading and coal quality determination, geotechnical drilling, sampling and analysis for improving the parameters associated with the design of stable pit slopes and dump slope designs, geotechnical evaluations for the civil works associated with construction of the mine and its facilities and infrastructure and the gathering of background data from the project area that will be needed in developing the Environmental Impact Assessment (EIA) for mine development.
Montem is planning an extensive exploration program at Chinook beginning in 2021.
This program will aim to provide the underlying information required to complete the PFS for Chinook.
Unaffected by policy reinstatement
Separately, the company indicated that its projects – The Tent Mountain Mine and the Chinook Project – will not be affected by the Government of Alberta’s decision to reinstate the Coal Development Policy for Alberta.
Montem’s Tent Mountain Mine and Chinook Project are wholly within Category 4, and all of Montem’s coal resource estimates (JORC 2012) are within Category 4 and are therefore unaffected by the Coal Policy rescission.