2018-06-01_REVISION - C1980007 (3)

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flows is zero. As an example, in our analysis we calculate that the most likely outcome from analysis is that the project will achieve an IRR of 121.5 percent. This implies that it would require a discount rate of 121.5 percent to cause the NPV to be zero. Return on investment (ROI) is used to indicate the efficiency at which invested capital generates profit. This indicator is simply calculated by subtracting the cost of investment from the gain in investment divided by cost of investment; or, in other words, divide the profit by the cost of the investment. Positive ROI indicates that the investment plus a profit is returned. Discounted cash flow is not used for this calculation so the ROI does allow an easy comparison of two investments that differ by the length of time before profit is returned. Using this analysis of this investment opportunity, the ROI for this project is most likely to be 80.6 percent, meaning that if implemented MCC could enjoy the return of their investment plus an additional 80 percent of the total cost of the project. Flaring as an methane abatement option at West Elk Through evaluation of the available gob gas and consultations with a representative of the local USBLM office as well as Holy Cross Energy and the DMEA, the utility that provides electricity to the West Elk Mine, the Raven Ridge team has determined that flaring is the best option for methane destruction at the mine. An Excel -based model was constructed to evaluate the economic performance of siting a flare within West Elk's lease boundary. Aereon provided a quote for an Abutec HTC 18 Combustor flare a newer model of the same flare which has been installed and is operating at the North Fork LLC project at the Elk Creek mine just north of West Elk. This high temperature flare offers up to 99.9 percent destruction efficiency along with a completely enclosed flame. Flare design conditions are listed below in Table 1. Table 1: Abutec Flare Process Data Gas composition 56.9% CH4 & 43.1% AIR Maximum flow rate 2.86 MMSCFD Rated heat release/HTF UNIT: 62 MMBTU/HR Inlet Temperature: 100°F max Inlet pressure: 30 psig Retention time: Minimum 0.3 SEC Destruction rate efficiency: 99.9% DRE Operating temperature: Up to 1,800 °F NOX emissions requirement: 0.15 LBS/M M BTU CO emissions requirement: 0.2755 LBS/MMBTU All criteria pollutants are negligible at the stated destruction efficiency. The proposed flare could consume an increased 20 percent volume of gas without design modifications. For modeling purposes, 2.86 million cubic feet of gas will be available daily, at a concentration of 56.9 percent methane (pso value of GVB production). These parameters were submitted to Aereon to ensure that the recommended flare is compatible with the conditions present at West Elk. The cost of the flare and other materials, equipment and labor incorporated into the model is described in Table 2. 13