Cardero reported some major deals today related to their Carbon Creek coal deposit, as a non-binding letter of intent has been inked between the company’s Cardero Coal Ltd. subsidiary and major area institution Conifex Timber, which will provide a nine-month exclusivity window for the company to secure a definitive lease agreement and operating agreement for a sizeable new transload facility on a piece of land in the Industrial Zone at Mackenzie, BC.
The plan here is for CDY is to implement a transload facility in support of their flagship Carbon Creek metallurgical coal deposit operations in BC’s Peace River Coal District. This massive, advanced-stage project with current ASTM Coal Rank mvB reserves in excess of 121M tonnes (469M tonnes measured and indicated) has a bright future, and the transload facility would become the main interface for a barge/rail hand-off workflow of material coming out of the mine and headed for the Ridley Terminals facility at Prince Rupert.
In addition, Cardero is reporting having entered talks with wholly-owned Confiex transportation subsidiary and complete end-to-end transportation solutions provider, Navcor Inc., for the transload facility’s operating agreement. The 2012 Prefeasibility Study completed by the company on Carbon Creek was very encouraging and has prompted a bankable feasibility study, due in large part to solid-looking cash flow estimates of around $2.2B (NPV8 of $633M, IRR of 24%, and all on a post-tax, 75% basis). Navcor is the perfect choice really and CDY will be getting considerable bottom-line mileage out of their vast expertise in commodity bulk transport, with Navcor having its hands on both the day-to-day transload facility operations and the CN Rail shipment management between Mackenzie and Ridley.
The transload facility will essentially be the go-between for material hand off, making use of a barge docking system and railcar loading system to get coal onto train tracks and moving towards Ridley. Initial lease on the project will be as much as 20 years (renewable to 40) and given current plans, the new infrastructure will support as much as 5M tonnes a year of throughput. While a formal transload operating agreement has yet to be signed, the LOI framework creates confidence that over the next few weeks, as the company moves to finalize track design and layout requirements with Navcor (for incorporation into the ongoing feasibility study prep work), details of the transload operating agreement will crystallize. Also still pending are settlement and execution of a definitive lease document, as well as other customary lease conditions, like performance of satisfactory due diligence by CDY.
Cardero also needs to nail down the necessary rail service, water lease, and ancillary permitting for the transload facility, but this shouldn’t be much of an issue and the net result will be an extremely cost-effective commodity transit loop. A processing node north of the planned mine will handle loading up clean coal for the roughly 109 mile barge trip to the transload facility in Mackenzie. This is a super cheap way to do all of this compared to just trucking the material and the overall environmental impact will also be reduced sharply, not to mention the lower logistical overhead and safety advantages.
Good call by CDY to lean on the experience of Conifex here and the overall portrait that is shaping up for their feasibility study of the Carbon Creek project just gets better and better looking, with these transload facility dealings marking a high-water point for the process thus far. Officer and shareholder of CDY, the company’s Exec VP, Keith Henderson, PGeo, acted as NI 43-101 qualified person for technical details contained in today’s report and has approved the relevant content herein.
Looks like the required geotechnical testing for the rail track, as well as necessary civil work, is on-schedule for completion this year. Interested parties can take a closer look at the deal, the project, or the company by heading over to the following Web site: www.Cardero.com.
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