It is reported that Continental Coal in a strategic move, will enter the higher margin coking coal market with an option to acquire a 50% interest in a producing Colombian mine. This means the potential for near to medium term cash flow from the already producing operation if Continental chooses to exercise the option.

Sales of hard coking coal are made at mine gate with current margins of around 75%. Sales directly to the export market are planned for 2013. The potential cost of this acquisition is USD 15 million.

Taking the option would enable Continental to operate, develop and expand an existing business which consists of five mining concessions/contracts covering over 1,500 hectares including the existing underground mine that has been in operation for 24 years and adjacent exploration ground.

Based on historic reports and its current due diligence, Continental believes annual production of 500,000 tonnes can be achieved in the medium term.

An independent technical review in 2010 determined that mine production can be increased from its current levels through the introduction of mechanisation, improvements to the mine infrastructure, a modified mine layout and an additional production shift.
Current underground production and access for the mine is through a series of declines to mine two seams with a total economic thickness of 1.7 metres. Mining is by a modified room and pillar mining method and, given the high quality nature of the coal, no wash plant is currently required.

The mine has a life in excess of 50 years, although currently it has no JORC Reserves or Resources.

Source - Proactive Investors

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