Morien Resources Corp. has received CAN$1.5 million from Kameron Collieries ULC (Kameron), an affiliate of The Cline Group LLC, and owner/operator of the Donkin Coal Mine (Donkin) in Cape Breton, Nova Scotia.
This final milestone payment was triggered by the first commercial sale of export coal from Donkin. Morien has a gross production royalty of 2% – 4% on all coal sales from Donkin.
Donkin Mine Update
Kameron commenced production at Donkin in the first quarter of 2017 and commissioned a coal handling, preparation and processing plant (washplant) in 3Q17, with sufficient capacity to process the permitted production volumes at Donkin of 2.75 million sales tonnes per year.
Kameron's previous production guidance for Donkin included reaching full production over a three-year period.
In response to changing mining conditions, Kameron is developing a new mine plan for Donkin and has ordered new mining equipment, both of which require regulatory approvals from the Nova Scotia provincial government. While production at Donkin continues, the timing of these approvals is unknown at present and may delay the rate of production increases. Should Kameron's production schedule change, Morien management will provide revised guidance for 2018 and 2019 production volumes when supporting information becomes available, which could be materially different from prior guidance.
Morien's Donkin Royalty
Morien owns a gross production royalty of 2% on the first 500 000 t of coal sales per calendar quarter and 4% on any coal sales from quarterly tonnage above 500 000 t (Royalty). The Royalty is payable to Morien on a quarterly basis over the anticipated 30-plus-year mine life.
Production at Donkin is expected to rise to the permitted production rate of 2.75 million sales tonnes per year over a three to four-year period. Using a range of coal pricing (CAN$55 to CAN$115 per tonne), annual royalty payments could be in the order of CAN$4.0 million – CAN$8.0 million at full production. These values are only estimates, based on judgments made by Morien personnel, and would be achieved only when the project commences and reaches maximum permitted production levels. Actual results and royalties received, if any, may vary from those considered Morien personnel.
The technical report presents the results of a Pre-Feasibility Study on the Donkin project and the reserves defined by the Pre-Feasibility Study prepared by Xstrata Coal Pty Ltd. Production assumptions are based on Probable Reserves of 58 million t. The reserve estimate is based on an Indicated Resource of 174 million t. The received royalty estimates for Donkin are only estimates based on 4Q17 assumptions that Morien management consider to be reasonable.