The Jameson Resources Limited (ASX: JAL) share price rocketed up by 13.33% on Thursday after a bankable feasibility study (BFS) on its Crown Mountain project forecast a pre-tax net present value (NPV) of US$376 million and an internal rate of return (IRR) of 36.4%.
Jameson Resources has two coking coal projects in Western Canada: the 1.7Mtpa clean coal operation, Crown Mountain, located in the Elk Valley in southeastern British Columbia, and another project in the Peace River region of British Columbia.
Image source: Getty Images
What were the details of the bankable feasibility study?
The BFS on the company's Crown Mountain project demonstrated that over the project's 15-year mine life it will produce an average of 86% of premium low volume high coking coal, which combusts at lower temperatures. In addition, 14% Pulverised Coal Injection coal (PCI), this is injected directly into blast furnaces without an intermediate coking phase.
The BFS reaffirms the robust economics of the project. First, the amount of waste removal required before extracting the coal is low, giving it a low strip ratio. Second, the project can operate at competitive operating costs through one of three deep water ports on the west coast of British Columbia.
The low life of mine costs are helped by ready availability of a skilled labour force without the requirements of having to build camp infrastructure, and excellent local vendor support.
Furthermore, there are opportunities to extend the life of mine through additional exploration, as well as opportunities to optimise the production. If the company undertakes either of these options it will increase the NPV and IRR of the investment.
Some of the production optimisation options include increased utilisation of processing plant hours via optimised maintenance, low cost Chinese steel sourcing to reduce construction costs, and further evaluation of contract mining to extract the coal.
Jameson Resources is currently considering all options presented to determine the level of funding required. The current BFS proposes an owner-operator model, requiring purchase or lease of heavy mobile assets and all facilities.
The company is considering various sources of funding. These include equity, debt, the use of contractors (to reduce overall pre-production capital requirements) and pre-paid offtake from the project.
About the Jameson Resources share price
The Jameson Resources share price jumped by 13.33% in Thursday's trading to close at 17 cents per share, valuing the company at $44.84 million. Jameson Resources shares are down around 10%, year to date, and 20.93% down on this time last year.
