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Assisting an Emerging Coal Producer in Colombia

Coalcorp Mining Inc (Coalcorp) is a Canadian mining company listed on the Toronto Stock Exchange (TSX), with two producing open pit coal mines in northern Colombia: La Francia and La Caypa, in the Cesar and Guajira departments, respectively. SRK assisted Coalcorp in acquiring the properties and has had an ongoing involvement with both. With an annual production of 1.2Mt from La Caypa and 2Mt from La Francia, Coalcorp is well on its way to achieving its aim of becoming a medium-tier producer in Colombia, bridging the gap between the very large coal producers, Cerrejon and Drummond, both with annual production of in excess of 20Mtpa, and the numerous smaller-scale producers in Colombia.

SRK has been working with Coalcorp, originally trading as Adobe Ventures, since it first took an interest in acquiring coal properties in Colombia in late 2004. Since then, SRK has visited numerous properties in the country’s coalfields on Coalcorp’s behalf. The properties have ranged from small-scale underground mines to larger, open pit operations with potential for later high wall or auger mining, and coal types, ranging from thermal to metallurgical.

From those visited, Coalcorp selected two thermal coal sites as being of further interest. They are primarily open pit operations in the Cesar – Rancheria valley, La Francia and La Caypa. The deposits are Palaeocene in age and limited in extent by regional thrust faulting. Both properties were in production at the time of acquisition. However, production levels were low, previous development had been haphazard, and, in the case of La Caypa, they were constrained by a lack of investment and, to some extent, by a lack of available tipping space. SRK prepared Competent Persons Reports (CPR) for both properties to comply with the Canadian National Instrument 43-101 Standards of Disclosure for Mineral Projects for publication on the TSX to raise finances for the acquisitions. Proven reserves at La Caypa were signed off at 8.76Mt and at La Francia at 26.75Mt.

The reserves at La Francia were measured from a single pit, Pit AB, in the southeast of the property. The pit was limited by a thrust fault, which repeated the succession to the northwest in an area designated Block C. Exploration had been carried out on this area, but no mine planning. SRK recognized that the potential in this block was limited by several factors, including the licence boundary, and recommended that Coalcorp approach the owners of the neighbouring properties. SRK did not provide estimates of resources for Block C at the time of reporting, but previous resource estimates were approximately 20Mt to a depth of 150m. Subsequently, Coalcorp came to an agreement with the owners of the adjacent property, to acquire the property. Once again, SRK produced a NI 43-101 CPR to support the acquisition and was able to sign off on measured and indicated resources of 41.7Mt on the new property.

A separate report updated the resources on the existing La Francia Block C to 52.6Mt, resulting in total resources for the combined La Francia Block C - El Triangulo of 94.3Mt. Mine planning is now underway to bring this area into production and to derive reserve estimates for the combined block.

Ongoing involvement for SRK at Coalcorp’s Colombian coal mines includes further mine planning, planning for a boundary agreement with the neighbouring producer to the southwest, which will release batter coal at the boundary, operational support including reconciliation, and further resource/reserve reporting.

Paul Bright:

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