Technical Report Aries Coal Project

155 Pages·2017·26.98 MB·English

by  Jocelyn Bissett

Technical Report Aries Coal Project
Submitted to:
Ram River Coal Corporation

Project Number: 624-10
Report Date: April 20, 2017
Effective Date: March 31, 2017

Norwest Corporation
Suite 1830, 1066 W. Hastings Street
Vancouver, British Columbia V6E 3X2
Tel: [phone]
Fax: [phone]
Email: [email protected]

www.norwestcorp.com
Authors:
Michael Allen, P.Eng.
Ivan Minev, P.Geol.

I am responsible for the preparation of Sections 1 through 12, Section 14, portions of
Section 24 through Section 28 of the report titled “Technical Report Aries Coal Project”
dated April 20, 2017, effective date March 31, 2017 (the Technical Report).
Table of Contents
1 SUMMARY ............................................................................................................................... 1-1
1.1 Project Highlights .................................................................................................................... 1-1
1.2 Technical Summary ................................................................................................................. 1-1
1.3 Location ................................................................................................................................... 1-2
1.4 Mineral Tenure ........................................................................................................................ 1-3
1.5 Property Description ............................................................................................................... 1-3
1.6 Geology ................................................................................................................................... 1-3
1.7 Resource Classification ............................................................................................................ 1-4
1.8 Reserves Classification ............................................................................................................ 1-6
1.9 Product Description................................................................................................................. 1-7
1.10 Development ....................................................................................................................... 1-7
1.11 Permitting and Community Engagement ............................................................................ 1-8
1.12 Capital and Operating Costs ................................................................................................ 1-9
1.13 Economic Analysis.............................................................................................................. 1-10
1.14 Conclusions and Recommendations .................................................................................. 1-11
2 INTRODUCTION ....................................................................................................................... 2-1
3 RELIANCE ON OTHER EXPERTS .................................................................................................. 3-1
4 PROPERTY DESCRIPTION AND LOCATION .................................................................................. 4-1
5 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY .............. 5-1
5.1 Property Access ....................................................................................................................... 5-1
5.2 Climate .................................................................................................................................... 5-1
5.3 Infrastructure .......................................................................................................................... 5-2
5.4 Physiography ........................................................................................................................... 5-2
6 HISTORY .................................................................................................................................. 6-1
6.1 Prior Ownership ...................................................................................................................... 6-1
6.2 Exploration Drilling Programs ................................................................................................. 6-1
6.3 Historical Resource and Reserve Estimates ............................................................................ 6-1
6.4 Production History .................................................................................................................. 6-4
7 GEOLOGICAL SETTING AND MINERALIZATION ........................................................................... 7-1
7.1 Regional Geology..................................................................................................................... 7-1
7.1.1 Jurassic - Lower Cretaceous Transitional Units ........................................................ 7-2
7.1.2 Lower Cretaceous Units – Luscar Group .................................................................. 7-2
7.1.3 Upper Cretaceous Units (Alberta Group and Brazeau Formation)........................... 7-4
7.2 Ram River Property Geology ................................................................................................... 7-5
7.3 Structural Geology................................................................................................................... 7-6
7.4 Coal Occurrences and Properties ............................................................................................ 7-6
7.5 Mineralization of The Blairmore Formation ........................................................................... 7-7

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Technical Report Aries Coal Project TOC-1
8 DEPOSIT TYPES ........................................................................................................................ 8-1
9 EXPLORATION .......................................................................................................................... 9-1
10 DRILLING ...................................................................................................................... 10-1
10.1 Drilling Programs ............................................................................................................... 10-1
10.2 Drilling Procedures............................................................................................................. 10-2
10.2.1 Pre-2012 Drilling Procedures .................................................................................. 10-2
10.2.2 2012 Drilling Procedures ........................................................................................ 10-3
10.2.3 2013 Drilling Procedures ........................................................................................ 10-4
11 SAMPLE PREPARATION, ANALYSES AND SECURITY ........................................................ 11-1
12 DATA VERIFICATION AND RESOURCE MODEL DEVELOPMENT ........................................ 12-1
12.1 Lithology Review ................................................................................................................ 12-1
12.2 Coal Quality Data Review................................................................................................... 12-1
12.3 Resource Model Preparation ............................................................................................. 12-2
12.3.1 Topography and Base of Till Horizons .................................................................... 12-3
12.3.2 Geologic Interpretation .......................................................................................... 12-3
12.4 Resource Model Preparation ............................................................................................. 12-4
12.4.1 Seam True Thickness .............................................................................................. 12-4
12.4.2 Seam Group and Seam Group Percentage ............................................................. 12-6
12.4.3 Coal-Waste Discrimination ..................................................................................... 12-6
12.4.4 Coal Quality and Specific Gravity ........................................................................... 12-7
12.4.5 Contact Count ......................................................................................................... 12-7
12.4.6 Run-of-Mine Values ................................................................................................ 12-8
13 MINERAL PROCESSING AND METALLURGICAL TESTING ................................................. 13-1
13.1 Sampling and Testing ......................................................................................................... 13-1
13.2 Seam Characterization ....................................................................................................... 13-1
13.3 Projected Coal Characterization & Washabilities .............................................................. 13-1
13.3.1 Large Mass Bulk Washability Laboratory Testing Program ................................... 13-2
13.3.2 Size Distributions .................................................................................................... 13-3
13.3.3 Individual Coal Seam Washability Characterizations ............................................. 13-4
13.4 Coal Product Specifications ............................................................................................... 13-6
13.4.1 Process Design Considerations ............................................................................... 13-7
13.4.2 Process Simulation ................................................................................................. 13-7
13.5 Projected Product Quality ............................................................................................... 13-11
14 MINERAL RESOURCE ESTIMATES ................................................................................... 14-1
14.1 Approach............................................................................................................................ 14-1
14.2 Basis for Resource Determination ..................................................................................... 14-1
14.3 Classification ...................................................................................................................... 14-3
14.4 In-Place Coal Resource Estimation .................................................................................... 14-3

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15 MINERAL RESERVE ESTIMATES ..................................................................................... 15-1
15.1 Pit Optimization ................................................................................................................. 15-1
15.2 Reserve Calculation ........................................................................................................... 15-2
15.3 Reserves ............................................................................................................................. 15-3
16 MINING METHODS ....................................................................................................... 16-1
16.1 Surface Mine Design Parameters ...................................................................................... 16-1
16.2 Mine Equipment ................................................................................................................ 16-1
16.2.1 Mine Rock Loading ................................................................................................. 16-2
16.2.2 Coal Cleaning and Mining ...................................................................................... 16-2
16.2.3 Support Equipment................................................................................................. 16-3
16.3 Mine Development and Phasing ........................................................................................ 16-3
16.3.1 Material Schedule .................................................................................................. 16-3
16.3.2 Pit Phasing .............................................................................................................. 16-4
17 COAL PROCESSING AND HANDLING METHODS .............................................................. 17-1
17.1 Coal Characterization & Washabilities .............................................................................. 17-1
17.2 Process Development Discussion ...................................................................................... 17-1
17.3 Process Design Considerations .......................................................................................... 17-2
17.4 Projected Product Quality ................................................................................................. 17-2
17.5 Operational Description of Preparation Plant Process Flow ............................................. 17-3
17.5.1 Product Coal Handling ............................................................................................ 17-3
17.5.2 CHPP Area Coal Handling ....................................................................................... 17-3
17.5.3 Overland Conveyor ................................................................................................. 17-4
17.5.4 Train Loading.......................................................................................................... 17-4
17.5.5 Reject Handling ...................................................................................................... 17-4
17.6 Plant Location .................................................................................................................... 17-4
18 PROJECT INFRASTRUCTURE AND PERSONNEL REQUIREMENTS ...................................... 18-1
18.1 Road Development ............................................................................................................ 18-1
18.2 Site Development .............................................................................................................. 18-1
18.3 Water Management Structures ......................................................................................... 18-2
18.4 Maintenance, Warehouse, Administration and Mine Dry Buildings ................................. 18-2
18.5 Electrical Requirements and Powerline Extension ............................................................ 18-3
18.6 Natural Gas Supply ............................................................................................................ 18-4
18.7 Rail Infrastructure .............................................................................................................. 18-4
18.8 Ports ................................................................................................................................... 18-4
18.9 Project Personnel Requirements ....................................................................................... 18-4
19 MARKETS AND CONTRACTS .......................................................................................... 19-1
20 ENVIRONMENTAL STUDIES, PERMITTING AND SOCIAL OR COMMUNITY IMPACT ........... 20-1
20.1 Jurisdiction and Applicable Regulations ............................................................................ 20-1

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20.2 Reclamation ....................................................................................................................... 20-1
20.3 Environmental Studies ....................................................................................................... 20-1
20.4 Water Quality and Selenium Management ....................................................................... 20-2
20.5 Aboriginal and Community Engagement ........................................................................... 20-2
21 CAPITAL, AND OPERATING COSTS ................................................................................. 21-1
21.1 Capital Costs ...................................................................................................................... 21-1
21.1.1 Pre-construction permitting, engineering and design. .......................................... 21-1
21.1.2 Mine Development and Infrastructure Capital Cost Estimates .............................. 21-1
21.1.3 Construction Management .................................................................................... 21-2
21.1.4 Mine Equipment Capital ......................................................................................... 21-2
21.1.5 Rail Extension Capital Cost Estimate ...................................................................... 21-2
21.1.6 Process Plant and Coal Handling Capital Estimate ................................................ 21-2
21.1.7 Initial Capital Cost Total ......................................................................................... 21-3
21.2 Operating Costs ................................................................................................................. 21-3
21.2.1 Mine Equipment Operating Costs .......................................................................... 21-4
21.2.2 Coal Process Plant and Coal Handling Operating Costs ......................................... 21-4
21.2.3 Transportation and Port Costs ............................................................................... 21-4
22 ECONOMIC ANALYSIS ................................................................................................... 22-1
22.1 Economic Assumptions ...................................................................................................... 22-1
22.1.1 Currency Assumptions ............................................................................................ 22-1
22.1.2 Metallurgical Coal Price ......................................................................................... 22-1
22.1.3 Salvage Value ......................................................................................................... 22-1
22.1.4 Reclamation Bond .................................................................................................. 22-1
22.2 Royalties and Taxes............................................................................................................ 22-2
22.2.1 Private Coal Royalty ............................................................................................... 22-2
22.2.2 Alberta Coal Royalty ............................................................................................... 22-2
22.2.3 Corporate Income Taxes......................................................................................... 22-2
22.3 Results ................................................................................................................................ 22-3
22.4 Sensitivity Analysis ............................................................................................................. 22-5
23 ADJACENT PROPERTIES ................................................................................................ 23-1
24 OTHER RELEVANT DATA AND INFORMATION ................................................................ 24-1
24.1 Alberta Coal Policy ............................................................................................................. 24-1
24.2 Alberta Land Use and Resource Development Framework ............................................... 24-1
24.3 Water Quality and Selenium Management ....................................................................... 24-2
25 INTERPRETATION AND CONCLUSIONS .......................................................................... 25-1
26 RECOMMENDATIONS ................................................................................................... 26-1
26.1 Development through Feasibility Study and Regulatory Approvals .................................. 26-1
27 REFERENCES ................................................................................................................. 27-1

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28 GLOSSARY .................................................................................................................... 28-1
29 ILLUSTRATIONS ............................................................................................................ 29-1

List of Tables

Table 1.1 In-Place Coal Resource Estimates .............................................................................................. 1-5
Table 1.2 Aries Project ROM Coal Reserve Estimates (Surface Mining) .................................................... 1-6
Table 1.3 Aries Project Clean Coal Reserve Estimates .............................................................................. 1-7
Table 1.4 Aries Clean Coal Product – Clean Coal Product Specification .................................................... 1-7
Table 1.5 Initial Capital Costs .................................................................................................................. 1-10
Table 1.6 Economic Results ..................................................................................................................... 1-11
Table 4.1 Legal Description of Coal Leases ................................................................................................ 4-2
Table 4.2 Legal Description of Coal Leases Applications ........................................................................... 4-4
Table 5.1 Average Daily Temperatures ..................................................................................................... 5-2
Table 6.1 Exploration Drilling .................................................................................................................... 6-1
Table 6.2 1974 Surface-Mineable Historical Reserves at 1.55 Float ......................................................... 6-2
Table 6.3 1980 Underground Mineable Historical Reserves (000-saleable tonnes) ................................. 6-3
Table 6.4 1982 Underground Mineable Historical Reserves (000-tonnes) ............................................... 6-4
Table 6.5 2013 Mineable Historical Reserves (000-tonnes) ...................................................................... 6-5
Table 10.1 Exploration Drilling ................................................................................................................ 10-1
Table 10.2 Coal Quality Sample Recovery Percentages .......................................................................... 10-4
Table 12.1 Drill Hole Dataset ................................................................................................................... 12-1
Table 12.2 Gridded Seam Model Limits .................................................................................................. 12-3
Table 12.3 Seam Name and Seam Code in 3DBM ................................................................................... 12-4
Table 12.4 Intervals Omitted in True Thickness Interpolation ............................................................... 12-5
Table 13.1 Product and Preparation Plant Operating Criteria ............................................................... 13-6
Table 13.2 Projected Product Qualities – Ram Coal Blend Seams 2 and 3........................................... 13-11
Table 14.1 In-Place Coal Resource Estimates .......................................................................................... 14-5
Table 15.1 Aries Project Basis for Reserve Estimate ............................................................................... 15-2
Table 15.2 Aries Project ROM Coal Reserve Estimates (Surface Mining) ................................................ 15-3
Table 15.3 Aries Clean Coal Product – Clean Coal Product Specification ................................................ 15-4
Table 15.4 Aries Project Clean Coal Reserve Estimates .......................................................................... 15-4
Table 16.1 Proposed Major Mobile Equipment List ................................................................................ 16-2
Table 16.2 Surface Mine Production Summary ....................................................................................... 16-5
Table 17.1 Calculated Seam Proportions & ROM Ash Contents for CHPP Feed ..................................... 17-2
Table 17.2 Projected Product Qualities – Ram Coal Blend Seams 2 and 3 ............................................. 17-3
Table 18.1 Power Requirements ............................................................................................................. 18-3
Table 18.2 Summary Average Personnel Requirements ......................................................................... 18-5

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Table 19.1 Forecast Price Outlook for Aries Coking Coal ........................................................................ 19-2
Table 21.1 Initial Capital Costs ................................................................................................................ 21-3
Table 21.2 Operating Unit Costs .............................................................................................................. 21-4
Table 22.1 2016 Corporate Income Tax Rates......................................................................................... 22-3
Table 22.2 Economic Results ................................................................................................................... 22-3
Table 22.3 Annual Cashflows ................................................................................................................... 22-4
Table 22.4 Economic Results Results NPV8 ($M) .................................................................................... 22-5
Table 26.1 Cost Components for the next Stage of Development ......................................................... 26-3

List of Figures

Figure 12.1 Area of Higher Seam 3 Dilution Highlighted ................................ Error! Bookmark not defined.
Figure 13.1 Ram Coal Froth Flotation Release Analysis Procedure ......................................................... 13-3
Figure 13.2 Ram Coal Rosin-Rammler Particle Size Distributions ........................................................... 13-4
Figure 13.3 Ram Coal Seam 3 Ash-Theoretical Yield Characteristics (50mm x 0.25mm) ........................ 13-5
Figure 13.4 Ram Coal Seam 2 Ash-Theoretical Yield Characteristics (50mm x 0.25mm) ........................ 13-5
Figure 13.5 Ram Coal Seam 2 Rider Ash-Theoretical Yield Characteristics (50mm x 0.25mm) .............. 13-6
Figure 13.6 Limn® Flowsheet Simulation – Ram Coal Blended Seams 2 and 3 ..................................... 13-10
Figure 13.7 Simulated Plant Product Yields as Function of ROM Ash ................................................... 13-12
Figure 13.8 Simulated Product Ash and Yields as Function of HMC Cut-point: .................................... 13-13
Figure 13.9 Simulated Product Ash and Yields as Function of HMC Cut-point: .................................... 13-13
Figure 13.10 Simulated Product Ash and Yields as Function of HMC ................................................... 13-14
Figure 15.1 Pit Shell Optimization Quantities ......................................................................................... 15-2
Figure 22.1 Sensitivity Analysis Graph. ................................................................................................... 22-6
Figure 26.1 Timeline for development through FS and EA .................................................................... 26-2

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List of Drawings
DRAWING 1 SITE LOCATION MAP
DRAWING 2 COAL PROPERTIES AND COAL TENURE PLAN
DRAWING 3 PROPERTY AND REGIONAL INFRASTRUCTURE MAP
DRAWING 4 SEAM 3 RESOURCE CLASSIFICATION MAP
DRAWING 5 SEAM 2 RESOURCE CLASSIFICATION MAP
DRAWING 6 SEAM 3 RESERVE CLASSIFICATION MAP
DRAWING 7 SEAM 2 RESERVE CLASSIFICATION MAP
DRAWING 8 STRATIGRAPHIC COLUMN
DRAWING 9 REGIONAL GEOLOGY MAP
DRAWING 10 STRUCTURAL GEOLOGY MAP
DRAWING 11 GEOLOGICAL CROSS-SECTION
DRAWING 12 SEAM 3 THICKNESS MAP
DRAWING 13 SEAM 2 THICKNESS MAP
DRAWING 14 DRILLHOLE LOCATIONS MAP
DRAWING 15 END OF PERIOD MAP Q4 - YEAR 1
DRAWING 16 END OF PERIOD MAP YEAR 3
DRAWING 17 END OF PERIOD MAP YEAR 5
DRAWING 18 END OF PERIOD MAP YEAR 10
DRAWING 19 END OF PERIOD MAP YEAR 15
DRAWING 20 END OF PERIOD MAP YEAR 25
DRAWING 21 END OF PERIOD MAP END OF YEAR 33 (EOM)
DRAWING 22 MATERIAL HANDLING FLOWSHEET SHEET 1 OF 2
DRAWING 23 MATERIAL HANDLING FLOWSHEET SHEET 2 OF 2
DRAWING 24 PLAND AND SUPPORT FACILITIES SITE PLAN
DRAWING 25 WATER MANAGEMENT
DRAWING 26 SHAPIRO-GRAY COMPOSITION BALANCE
DRAWING 27 THERMAL RHEOLOGY VM-DILATION
DRAWING 28 MOF MEAN-MAX GRAPH - DDPM

Ram River Coal Corporation 624-10
Technical Report Aries Coal Project TOC-7