2010-12-17_REVISION - C1981019 ‎(130)‎

• Permit No: C1981019
• IBM Index Class Name: Revision
• Doc Date: 12/17/2010
• Doc Name: Exhibit 6 Item 7 Geology Pre-Feasibility Part 2
• Type & Sequence: PR3
• Media Type: D
• Archive: No

• 2 MAJOR FINDINGS
•
2.1 Colowyo Cost Ranking Study (CRS)
A thorough review of all CRS assumptions and evaluation results was not possible due to
documentation gaps. Supporting studies by external consultants on infrastructure designs
and cost estimates for each open cut option are available and well documented; however
there are no written reports available on resource assessment and mine planning studies.
Electronic models including mining schedules and financial evaluations were made available
by CCC, but have not been examined in any detail as part of this review.
The Colowyo Underground Pre - Feasibility Study has been well documented and reviewed
previously by TS in 2003.
On the evidence available there are no obvious flaws in the CRS or its conclusion that
Collom is the preferred development option for future CCC reserves. The South Taylor and
Lower Wilson resources have significantly lower tonnages and also higher strip ratios than
Collom (see Table 2.1 below). All options require investment in infrastructure for access, coal
handling and coal haulage (either road or conveyor) back to the existing CCC rail load -out.
Table 2 -1: Colowyo Open Cut Resource Options (from CRS, 2003)
* Approx. volumes inferred from CRS Case Summary spreadsheet.
2.2 Collom Project Economics
Based on the most recent mine plans and cost estimates, the Collom project continues to
show significantly unfavourable economics. Using a US$13.50 /t long run coal price (as per
RT Economics), the project NPV was reported at negative US$167M. CCC is currently
achieving spot coal sales at prices in excess of US$20 per ton. CCC management and KEC
Marketing staff are optimistic that long term contracts can be secured at these higher prices.
Approval of funding for the Collom Feasibility Study in 2005 is considered likely to be
dependent on confirming the potential for higher priced contracts and providing improved
confidence in Collom's economic viability.
Although less likely, there may also be potential to improve economic viability through a
smaller scale development targeting higher margin coal. It is not evident that work to date
• has examined a sufficient range of options to confirm that the chosen project scale
RIO
'PINTO
TS Ref: DRAFT Version: 1 5 T -1-i -I Se.mc�!s
Recoverable Coal
(million tons)
Prime Waste*
(million bcy)
Strip Ratio
(Prime bcy / rec. ton)
West Pit
33
220
6.7
South Taylor
45
398
8.8
Lower Wilson
11
98
8.9
Collom
144
1,028
7.2
Table 2 -1: Colowyo Open Cut Resource Options (from CRS, 2003)
* Approx. volumes inferred from CRS Case Summary spreadsheet.
2.2 Collom Project Economics
Based on the most recent mine plans and cost estimates, the Collom project continues to
show significantly unfavourable economics. Using a US$13.50 /t long run coal price (as per
RT Economics), the project NPV was reported at negative US$167M. CCC is currently
achieving spot coal sales at prices in excess of US$20 per ton. CCC management and KEC
Marketing staff are optimistic that long term contracts can be secured at these higher prices.
Approval of funding for the Collom Feasibility Study in 2005 is considered likely to be
dependent on confirming the potential for higher priced contracts and providing improved
confidence in Collom's economic viability.
Although less likely, there may also be potential to improve economic viability through a
smaller scale development targeting higher margin coal. It is not evident that work to date
• has examined a sufficient range of options to confirm that the chosen project scale
RIO
'PINTO
TS Ref: DRAFT Version: 1 5 T -1-i -I Se.mc�!s