Sep 23, 2014 - Knight Piesold was retained to conduct the hydrogeological and ... exposures, simple 'truck and shovel' o
CORPORATE DIRECTORY DIRECTORS James Chisholm (Chairman) Russell Moran Gino D’Anna Eric Lilford Cameron Vorias (appointed 3 July 2014) Steven Boulton (appointed 22 August 2014
COMPANY SECRETARY Gino D’Anna REGISTERED AND PRINCIPAL OFFICE Level 1 329 Hay Street Subiaco WA 6008 Telephone: Website: Email:
(08) 9388 3131 www.atrumcoal.com
[email protected]
SHARE REGISTRY Security Transfer Registrars Pty Ltd 770 Canning Highway Applecross WA 6153 Telephone: Facsimile:
(08) 9315 2333 (08) 9315 2233
AUDITORS BDO Audit (WA) Pty Ltd 38 Station Street Subiaco WA 6008 SOLICITORS Steinepreis Paganin Level 4, The Read Buildings 16 Milligan Street Perth WA 6000 AUSTRALIAN SECURITIES EXCHANGE Atrum Coal NL shares (ATU) are listed on the Australian Securities Exchange.
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DIRECTORS REPORT Dear Shareholders It is my pleasure to present Atrum Coal NL’s Annual Report for the 2014 Financial Year. The past 12 months have seen our Company take great strides towards our goal of developing metallurgical coal projects in British Columbia, Canada and bringing to life our vision to become the world’s largest high-grade and ultra-high-grade anthracite producer. Major milestones achieved during the development of our 1.57 billion tonne Groundhog Anthracite Project over 2014 included the completion of a Pre-Feasibility Study (PFS), which demonstrated robust economics for a peak 5.4Mtpa run-of-mine underground operation at Groundhog. The PFS demonstrated that pre-production costs at Groundhog would be approximately A$10 million in 2014/15, and ramp-up costs in 2015/16 would total US$70.6M under contract mining and build-own-operate-transfer (BOOT) arrangements. Using independent price forecasts and a discount rate of 8%, the project has a pre-tax Net Present Value (NPV) of A$2.1 billion (post-tax NPV of A$1.3 billion) and a pre-tax Internal Rate of Return (IRR) of 68% (post-tax IRR of 51%) based on power and road infrastructure CAPEX being funded by Atrum. The infrastructure required will be optimised further through off-balance sheet funding provided by Atrum Infrastructure Pty Ltd further improving the NPV and IRR. The PFS for Groundhog focussed on the north-west zone and on just two seams from more than 20, representing less than 5% of the total project area, so potential for future growth remains. An optimised PFS is due to be released taking into account attractive equipment financing terms currently being offered in the market which will result in reduced CAPEX and OPEX. The recent drilling and trenching program and geological correlation has highlighted the potential for Groundhog to support multiple mines and the Company is now undertaking concept studies for mines in other locations across the property. Atrum’s management has laid the foundation for our entry into the market as we continue to build relationships with key steel and specialty product manufacturers. Groundhog has the potential to deliver significant amounts of high-grade anthracite to steelmakers operating in a safe mining jurisdiction in a way that is currently not available, and many potential customers are excited about what the project offers. We successfully completed maiden ship loading trials at Stewart Bulk Terminal to test storage, coal handling and loading facilities and this demonstrated that the existing equipment is capable of loading at least 1.5Mtpa of anthracite. The Company also has an agreement for a further 5Mtpa capacity at Stewart World Port (SWP), which is currently under construction. We plan to deliver first anthracite on ship through trial mining during 2015, and we are currently preparing market samples for customers. We expanded our tenure in British Columbia during the year, initially with the granting of a further four coal licences, and then with the addition of 20 granted coal licences and one coal license application purchased from Anglo Pacific PLC. With the acquisition of the Anglo Pacific PLC licences, Atrum has succeeded in consolidating all the known anthracite-bearing tenure in the Groundhog and Panorama coalfields. The Company now holds approximately 800sqkm of contiguous licences in the World’s largest known high grade and ultra-high grade anthracite resource, only 150km direct distance to a deep sea port that is open all year round. In May, we announced that Kuro would develop the Panorama Anthracite Project under joint venture. However, after reviewing geological information for the Panorama region and in light of Atrum’s strategy to be the world’s largest producer and exporter of high-grade anthracite, we have decided to retain Panorama. The project has the potential to contribute significantly to our overall multi-mine plans and Atrum will begin exploration at Panorama pursuant to the recently granted Notice of Works. As previously announced, the non-core assets currently held in Atrum (Naskeena, Peace River and Bowron River) are being moved into Kuro Coal Limited, with an IPO of Kuro planned prior to the end of 2014. Subsequent to the end of the financial year, Kuro added to its portfolio of exploration assets with the addition of an earn-in joint venture on a JORC compliant coking coal asset, Elan. Atrum shareholders will be eligible for one free Kuro share for every four Atrum shares held at the record date. As we progress towards production, we made a number of significant Board and management appointments. Steven Boulton and Cameron Vorias became Non-Executive Directors of the Company, both with more than 30 years of experience in the industry. Steve is one of Australia’s leading infrastructure executives and will assist the Board to deliver a low-cost infrastructure strategy initially at Groundhog as well as helping the Company develop infrastructure options for our multi-mine strategy. Cameron’s experience in coal mining operations including new project development, resource management and risk management will also be invaluable to Atrum. We established an Anthracite Marketing Advisory Committee (AMAC) and appointed leading coal marketing specialists George Edwards and Stephen Gye. Combined, they have more than 85 years’ experience in global metallurgical coal and coke markets. AMAC will bring together industry experts to oversee our strategic off-take discussions and ensure the Board can maximise shareholder value. Other strategic appointments include Peter Doyle as our VP Marketing and Business Development, Ben Smith as VP Operations and Rick Greene as Project Manager (Mining Operations) and Theo Renard (VP Commercial). Each of these appointments will play an important role in Atrum’s future.
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DIRECTORS REPORT I thank our management and staff for their hard work over the past year, as well as my fellow Board members for their contributions. I also thank our Shareholders for their continued support and their belief in our vision and strategy. I believe we will see this come to fruition in the near future.
James Chisholm Chairman
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DIRECTORS REPORT COMPANY OVERVIEW On or about 27 February 2012, the Company exercised an option to acquire 100% of the Groundhog Anthracite Project located in British Columbia and in July 2012, listed on the Australian Securities Exchange under the ASX ticker code “ATU”. During the exploration season completed in 2012 and 2013, the Company undertook significant drilling at Groundhog covering both regional / exploration drilling across the project and infill drilling in the North West area of Groundhog. This was further complemented by additional coal quality analysis to further enhance the Company’s understanding of the use and quality of the anthracite developed at Groundhog. In January 2014, Atrum expanded upon its footprint in BC, through the acquisition of a further 11 coal licence applications from Panstone Mines and Minerals Ltd. This footprint was further expanded in September 2014 when the Company acquired a further 20 granted coal licences and a further 1 coal licence application from Anglo Pacific Group PLC, which covered an area of 10,235ha within the Groundhog and Panorama Coalfield. In July 2014, Kuro Coal Panorama Inc. acquired an additional 10 coal licence applications covering an area of 13,787ha from Panstone Mines and Minerals Ltd. This acquisition complemented the existing land holding in the Panorama coalfield held by Kuro Coal Panorama Inc. which covered an area of 18,375ha. This has provided the Company with a total footprint in the Panorama coalfield of 33,012ha. In addition, the Company received confirmation from the British Columbia Mines Department that Groundhog coal licence application 417980 (tenure number 418443), 417981 (tenure number 418444), 417994 (tenure number 418445) and 417993 (tenure number 418446) had been granted and converted to coal licences following consultation with local community, First Nations and ministerial stakeholders. This increased the total granted tenure at Groundhog by an additional 5,454 hectares. The Groundhog Anthracite Project (Groundhog), including Panorama, now comprises 45 granted coal licences and 33 coal licence applications covering an area of 81,616 hectares. The Groundhog project boasts a 1.57Bt JORC Measured, Indicated and Inferred resource and is a high ranking anthracite deposit, capable of delivering a sub-10% ash product with ultra-low volatile content, high calorific value, low sulphur, high fixed carbon and very low inherent moisture with wash yields up to 75%. Anthracite is a widely used high value input in the steel manufacturing process, replacing between 10% and 30% of coke used in the blast furnace. It can also be used in the manufacture of specialty steels and alloys, electric arc furnaces, ore sintering, charge carbon, reductants and cathode pastes as an alternative to graphite. The table below provides a breakdown of the JORC resource according to the necessary classifications:
Groundhog Anthracite Project
Measured (Mt)
Indicated (Mt)
Inferred (Mt)
Total (Mt)
16Mt
553Mt
998Mt
1,567Mt
The indicative quality specifications for the anthracite developed at the Groundhog project which is applicable to each of the resource classifications outlined above and compared to global indicative specifications is outlined below: Groundhog Anthracite Project (adb)
High-Grade Anthracite (adb)
Ultra-High Grade Anthracite (adb)
Chinese BF Coke (adb)
