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Northern Energy sits on $1.5bn at Colton

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5.9 million tonne reserves announced

Northern Energy Corporation has announced probable reserves of around 5.9 million tonnes of hard coking coal at its Colton Mine, part of the Maryborough project in Queensland.

At current prices, the company values the resources at around $1.5 billion and said there is more to come.

“The identification of reserves at the Colton Mine Area represents an important milestone in the plans of the company to establish a 500,000 tonnes per annum open cut mine at Colton,” said NEC managing director Keith Barker.

“These reserves have been identified following mine engineering and evaluation over the coal resources identified in and around the planned Colton mine area. In addition to the probable reserve, the analysis has identified the potential to extend the reserve area subject to upgrading previously announced inferred resources.”

In April this year NEC announced an 83 million tonne resource at Maryborough (9.5mt indicated and 73.5mt inferred).

Mine engineering and evaluation work is expected to expand on these reserves which could extend the mine life or increase the rate of production at Colton.

“On the basis of our current evaluation work, which is ongoing, we are confident that following successful exploration planned to commence next month an extension of the Reserves at Colton will be possible”, Mr Barker said.

“Increased reserves will allow us to consider more options for Colton, including an increase in production rate to around 1mtpa, which could be achieved at very low incremental capital cost, but would be subject to a separate approval process.”

“While the Colton project has not progressed as quickly as previously anticipated the delineation of this initial reserve is another important milestone for the Colton Mine and NEC.”

The output from these important studies has an impact on the inputs to the Environmental Management Plan, which has also been delayed as a result.”

“Nevertheless, with a value at current market prices of around $1.5 billion the company has a realistic objective of joining the ranks of hard coking coal producers within the next two years.

“Project timelines are currently under review but our most recent estimates are that shipments are not expected to commence before the second half of 2012.”