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The UK’s first coking coal approval in three decades could open the door for New Age’s first class Lochinvar project
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The British Government has opened the door for the renewal of its domestic coking coal industry, approving the first deep coal mine in the UK in 30 years.
The approval of West Cumbria Mining’s Woodhouse Colliery has come after eight years of deliberations from the UK Government on the 3.1Mtpa steelmaking coal mine, which will create around 500 local jobs.
While approvals processes for coal have become tougher to navigate across the world the news the mine has been granted planning permission by Levelling-Up Secretary Michael Gove on Wednesday could open the door for the industry’s revival.
It came with an admission from Gove that steelmaking processes to replace conventional blast furnace production would not be widespread commercially until the 2040s.
In a letter outlining the decision, Gove’s department said the secretary was “satisfied that there is currently a UK and European market for the coal.”
“The Secretary of State agrees that there is no certainty that Electric Arc Furnaces (EAF) will make a significant contribution to UK steel production in the short (5-10 years) to medium term (10- 15 years) and agrees that whilst there is a likelihood that its use will increase across Europe, the extent to which this may be the case cannot be predicted with any degree of certainty,” they said.
Who else is in line?
The news opens a door for other British coal developers, with New Age Exploration (ASX:NAE) among the best placed to move next.
It owns the Lochinvar coking coal deposit, which straddles the border between England and Scotland and contains 111Mt of metallurgical coal including 49Mt of indicated resources.
A scoping study in October 2014 confirmed its potential for a low cost, long life 1.9Mtpa long wall mining project which could deliver 1.4Mtpa to UK and European markets.
An update in March 2017 on the back of a rise in metallurgical coal prices delivered a robust set of economics with a post tax NPV of US$410 million (AUD$610m today) with an IRR of 27%, 4 year payback period and 26 year mine life.
A review released last week showed those numbers remained robust despite cost increases in the UK.
“This review of the Scoping Study re-confirms Lochinvar remains a commercially robust project,” NAE executive director Joshua Wellisch said on November 28.
“The reality is that the requirement for metallurgical coal in the process for steel production will remain intact for the foreseeable future and likely for decades to come.
“The Board continues to receive numerous enquiries relating to the Lochinvar metallurgical coal project, with geopolitical events driving a dramatic change in demand for metallurgical coal.”
The 2017 update was undertaken at US$160/t for spot hard coking coal against operating costs of US$58/t. The API2 price for coal imported into north-west Europe is currently around US$260/t.
A further optimisation study in 2019 showed the project could be mined with competitive Bord and Pillar underground mining methods down to depths of 400m, with 33Mt of the Lochinvar resource in the Nine Foot seam between 200-400m deep.
According to analysis from Wood Mackenzie, New Age would deliver a low ash high volatile coking coal product at Lochinvar with a high yield that will be attractive to the UK and European steel industry.
NAE says it is comparable to highly sought after US High Vol A Hard Coking Coal.
Three Amigos
The brighter outlook for NAE’s Lochinvar coking coal project after the Woodhouse decision shows it has three strong fronts to focus its attention on in 2023.
NAE also owns gold assets in New Zealand’s Otago region, where it is searching for gold deposite at the Lammerlaw project similar in nature to the 10Moz plus Macraes gold mine.
It is also exploring for gold and lithium in the Pilbara, in the underexplored Mallina-Whim Creek Basin close to the world class Wodgina and Pilgangoora lithium mines and Hemi gold deposit.
Last week NAE announced it had uncovered extensive lithium geochemical anomalies at its Central Pilbara project with values of up to 843ppm lithium in five areas up to 8km long, 3km wide and open in all directions.
Outcomes of recent and upcoming exploration activities, including a helicopter reconnaissance program, will be used to refine and prioritise gold and lithium drill targets.
This article was developed in collaboration with New Age Exploration, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
