Phoenix Coal Inc announced that it has entered into a sublease agreement with Petersburg Coal, LLC. The subleased mineral reserves are contiguous to Phoenix's Gryphon Mining Complex, formerly known as the Pratt Mine. All mineral reserve and mineral resource quantities are assumed to be quoted in imperial tonnes.
Mr David A Wiley president and CEO of Phoenix Coal said that "With the sublease, Phoenix now controls over 40 million tonnes of underground reserves within the Gryphon Mining Complex."
Mr Wiley said that "In addition to the new reserves, Phoenix will have access to an alternative portal location capable of supporting efficient surface logistics and access to transportation routes, including rail, which will significantly increase the number of customers to which we can economically ship coal. The addition of Petersburg expands a project that is an important component of Phoenix Coal's growth plan and enhances the strategic value of our entire asset base."
Under the terms of the agreement, Phoenix will pay USD 3 million at closing and an additional USD 3 million upon satisfactory completion of certain contingencies, including receipt of all required permits. Phoenix's total royalty rate for coal sold from the Gryphon Mining Complex shall be 6% of gross sales price.
In addition to the estimated coal reserves contained within the Gryphon Mining Complex, Phoenix also controls 76 million tonnes of coal mineral resource at its Panama South Property as of December 31st 2007. Both the Gryphon Mining Complex and Panama South are located in Webster and Henderson Counties in Western Kentucky. The Company expects this region will serve as the hub for its future underground mining operations.
A preliminary estimate of the coal mineral reserve contained in the Gryphon Mining Complex was calculated as of March 25th 2009 by Marshall Miller & Associates, Inc, an independent geological and engineering consulting firm headquartered in Bluefield, Virginia. MM&A has provided project feasibility studies and related engineering and geological services at coal projects and mines worldwide since 1977.
MM&A estimates that the Gryphon Mining Complex contains a proven and probable mineral reserve of approximately 43 million tonnes of thermal grade bituminous coal, located on approximately 10,000 acres. The mineral reserve at the Gryphon Mining Complex is underground proven and probable reserves in the Western Kentucky No. 9 coal seam. In order to calculate the quantity of the mineral reserve at the Gryphon Mining Complex, MM&A utilized exploration drilling logs and property control maps provided by Phoenix and Petersburg and public domain data from the Kentucky Geological Survey. The Petersburg property was not included in the mining plan and financial analysis developed for the NI 43-101, dated March 10th 2008. All of the requirements of the technical report relating to the Gryphon Mining Complex including the Petersburg property will be fulfilled when the NI 43-101 is updated.
