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Colonial Coal – Leading Coking Coal Development in Western Canada

Colonial Coal International Corporation

Overview

Led by experienced coal project developer David Austin, Colonial Coal International Corp. (TSXV:CAD) is a pure-play coking coal development company focused on its resource stage Huguenot and Flatbed properties, located in northeast BC’s Peace River Coalfield. Notably, Colonial Coal features a highly experienced management team responsible for the development of two producing mines in the region.

Huguenot is adjacent to the Belcourt Project (Anglo American / Walter Energy), and other nearby properties are owned by Teck Resources and Canadian Dehua. This strategic location provides the potential for logical partnership opportunities as well as access to excellent existing infrastructure.

Colonial Coal released its preliminary economic assessment for the Huguenot property in September 2013, which demonstrated attractive project economics.

Investment Highlights

  • Focused in the mining friendly jurisdiction of British Columbia
  • Developing one of the largest, highest quality, hard coking coal deposits in western Canada
  • Strategically located adjacent to major projects: Belcourt Project (Anglo American / Walter Energy), and properties owned by Teck Resources and Canadian Dehua
  • Rail and other infrastructure shared with other nearby projects would reduce costs and provide practical benefits
  • Highly capable management team, including David Austin, with significant prior experience advancing other development projects to production in the region
  • Stake in potential development of a port facility at Watson Island
  • Poised to take advantage of long term Asian demand for coking coal

Key Properties

Huguenot

Located within the prolific Peace River Coalfield, approximately 85km southeast of Tumbler Ridge, British Columbia, Colonial Coal’s 100 percent owned Huguenot Coal Project covers a total area of 22,893 hectares and consists of one contiguous block of 32 coal licenses.

The Peace River Coalfield is host to a large number of exploration and mining activities including Teck Resources’ (TSX:TCK) proposed Window open pit mine (Quintette) and Anglo American’s (LSE:AAL) producing Trend mine. The coal at Huguenot ranks as hard, premium quality, coking coal, with a similar composition to coal currently being exported from the Trend mine. With its low ash, low sulphur content and high FSI, the coal contained at Huguenot is highly desireable for coking coal markets.

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Peace River Coalfield
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A preliminary economic assessment for Huguenot was completed in September 2013. This study updated previously reported in situ potentially mineable resources, and developed conceptual open pit and underground mining plans. Highlights from the report included:

  • A total projected life of mine of 31 years, with the open pit operating for years 1-14 and the underground operating for years 3-31
  • A projected clean coal production of 89 million tonnes over a mine life of 31 years.
  • A proposed payback of initial capital estimated at six years after the start of coal production

Huguenot currently has a contained resource of 397 million tonnes, making it one of the largest deposits in the region.

Production from Huguenot would be shipped via rail to export terminals on the west coast of British Columbia. Rail lines out of the Peace River Coalfield are operated by CN Rail, the largest railway company in Canada, (a Class 1 carrier).  There is available capacity to support future production from Huguenot.

The PEA assumes that the rail line would be built and operated by an independent third party; cost would be recovered by user tariffs.

Sharing infrastructure (roads/rail) with other potential operators in the region would lower initial capital costs and rail operating cost. The rail line, if not built and operated by an independent third party, could be constructed on a shared basis with other coal producers and rail providers. This would reduce costs, as they would be distributed across all operators in the region for greater scale and lower per tonne cost.

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Flatbed

Also 100 percent owned by Colonial Coal and located within the Peace River Coalfield, the Flatbed project is located between approximately 8 and 10 kilometres from the existing Quintette and PRC loadouts. The property is adjacent to the Trend and Quintette mines, and has the potential for a large tonnage deposit, with a 100+ Mt coking coal resource target.

In June 2014, the British Columbia Ministry of Energy and Mines issued seven coal licences over the Flatbed property. These licenses (covering 9,077 hectares), plus 3 remaining coal license applications (covering 2,400 hectares), include three targets identified by an independent geological consultant as being worthy of exploration aimed at the location of underground mineable metallurgical coal deposits. The Ministry is now reviewing Colonial Coal’s application for a Work Permit which would allow the company to conduct exploration activities.

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Watson Island Port Project

Colonial Coal, through its subsidiary Watson Island Development Corp. (Watco), entered into a memorandum of understanding with the Lax Kw’alaams and Metlakatla First Nations to form a joint venture for the potential acquisition of the Watson Island site with the intention to redevelop the area into a multi-product bulk seaport terminal and industrial park. Watson Island Development Corp. has an exclusive arrangement with the City of Prince Rupert to purchase Watson Island.

Watco has undertaken a feasibility investigation in relation to the development of Watson Island. Currently, the MoU is non-binding and sets out general terms and parameters regarding the potential financing, development and use of the Watson Island Land.

Watco is currently in litigation with the City of Prince Rupert in connection with the acquisition of Watson Island.

Summary

Colonial Coal is rapidly advancing its Huguenot and Flatbed properties with a view to becoming one of Western Canada’s leading coking coal developers. Its highly experienced management team includes David Austin, who has already been involved in a number of coal projects within the Tumbler Ridge area.

Colonial Coal is currently moving forward with further exploration at its Huguenot project and is awaiting work permits for exploration at its Flatbed property. The Huguenot property contains premium quality hard coking coal, an important component of steelmaking that is seeing increasing demand from Asian markets. Colonial Coal has shown its commitment to exporting coking coal from northeastern BC through its stake in the development of Watson Island as a new terminal for the export of increased coal production from the province.

Management

David Austin – Chief Executive Officer, President, Director, Chairman of the Board

Mr. Austin has served as the President and as a Director of Colonial Coal since August 2005 and as the CEO and Chairman of the Board since November 2008. Mr. Austin also served as the President of NEMI Northern Energy & Mining Inc. (NEMI) from 2001 to 2004 and was a founder of both Western Coal and NEMI.

William Filtness, CA – Chief Financial Officer

Mr. Filtness has been the Chief Financial Officer of Colonial Coal since August 2010. He is also a senior consultant with Malaspina Consultants Inc as well as president of KCT Consulting Inc. Mr. Filtness has also served as the Chief Financial Officer for High Desert Gold Corp. from 2007 to 2013 and South American Silver Corp. from 2006 to 2012. Mr. Filtness also served as the CFO of NEMI Norther Energy & Mining Inc. from 2003 to 2007.

John Perry – Chief Operating Officer and Director

Mr. Perry has served as Chief Operating Officer and as a Director of Colonial Coal since May 2008. Formerly, Mr. Perry served as the Director of Exploration for the Belcourt Saxon Coal Limited Partnership (from 2005 to 2008), Manager of Exploration for NEMI Northern Energy & Mining Inc. (from 2004 to 2006), and as a geological consultant to the coal and minerals industry since 1980.