Coal is one of the true measures of the energy strength of the United States. One quarter of the world’s coal reserves are found within the United States, and the energy content of the nation’s coal resources exceeds that of all the world’s known recoverable oil. Coal is also the workhorse of the nation’s electric power industry, supplying more than half the electricity consumed by Americans.
Metallurgical coke is used as a fuel and as a reducing agent in smelting iron ore in a blastfurnace. The product is too rich in dissolved carbon, and must be treated further to make steel. The coke must be strong enough to resist the weight of overburden in the blast furnace, which is why coking coal is so important in making steel by the conventional route.
Metamining joined with Ryan Holdings to form a joint venture, Spiro Mining, in Oklahoma to take ownership of Coal Creek Minerals, LLC and its Red Bank Creek Mine located in Le Flore County, OK.
This property is estimated to contain approximately 50 million tons of coal that can be processed to meet the needs of metallurgical coal consumers. Exploration of the surrounding area is proceeding to determine the full extent of the reserves.
Spiro Mining is in the process of re-opening the mine for production in the 3rd quarter of 2010 and is slated to begin annual production rates of 500,000 tons of saleable coal beginning in 2011. It is planned for annual production levels to reach 800,000 to 1,000,000 tons per year in the future.
In addition, Metamining is evaluating additional properties in the Oklahoma/Arkansas area to further expand the potential coal reserves. These additional properties have been explored and assessed in the past and a significant amount of research has already been completed.
The mine location outside of Spiro, OK has favorable logistics characteristics. Loading for transportation by river barge to New Orleans via the Arkansas and Mississippi Rivers can be made in Keota, OK or Fort Smith, AR. Loading for transportation by railroad to several ports located in the Gulf of Mexico in Texas, Louisiana, and Alabama can be made at Spiro, OK. A coal loading facility will need to be constructed adjacent to the Kansas City Southern Railroad (KCSRR). This facility will be designed to a capacity commensurate with the projected 500,000 ton production levels for the project.
Coal Mine Location:
This development project has several favorable economic, market access, operational, regulatory, and logistical attributes:
- Coal was previously mined in 2006 and 2007.
- Coal reserves are located under 1,890 acres of U.S. Bureau of Land Management (BLM) leases and under an adjacent 982 acres of private leases.
- A potential additional 25 million tons of reserves are available for lease on land accessible only by this project.
- 228 acres of surface land is owned for supporting coal processing activities, equipment maintenance, and administrative facilities.
- Coal mining and extraction can resume July 1, 2010.
- Economic analysis indicates initial startup costs of $15.2 million which includes equipment, engineering, working capital, and a coal washing facility.
- A coal washing plant converts the run-of-mine coal to metallurgical grade to meet specific customer requirements. Blending facilities are possible at several ports to further expand the range of specifications.
- Royalties due to the BLM have been paid in advance. BLM royalties, currently at 2%, would apply only to the coal mined on the BLM lease. The advanced payment is equivalent to royalties due on 1million tons of coal sold, assuming price of $45 per ton for run-of-mine (ROM) coal.
- A nearby power plant provides a potential consumer for early project run-of-mine production (In fact, the power plant owned the mine previously through a subsidiary.)
- The State of Oklahoma supports coal mining businesses with a positive regulatory and economic support programs and offers a $5 per ton tax credit for business mining coal in the State.
- Management and operations personnel are available for quick deployment.
- Mining equipment is readily available.
- Logistics support is very favorable with nearby access to rail and barge transportation to ports in the Gulf of Mexico and rail transportation to the West Coast of Mexico.