Cardero Resource Corp. (TSX:CDU,NYSE:CDY,FWB:CR5) reported on coal quality results from its Carbon Creek Metallurgical Coal deposit. Wood Mackenzie completed a comprehensive benchmarking study, which yielded positive results. Highlights include the Hard Coking Coal (HCC) and Semi-Soft Coking Coal (SSCC) being close to benchmark specification. Also, indicative metallurgical product coal quality is positive.
As quoted in the press release:
Highlights of Wood Mackenzie Benchmarking
- Based on the coal quality data supplied to Wood Mackenzie by Cardero, the following conclusions from the Study are particularly relevant:
- Both the Hard Coking Coal (“HCC”) and Semi-Soft Coking Coal (“SSCC”) are close to benchmark specification. Indicative metallurgical product coal quality is positive. (Figure 1).
- Carbon Creek’s HCC will be marketed as a Mid-Volatile (“mid-Vol”) HCC, based on average Volatile Matter (“VM”) content of 27%, Coke Strength after Reaction (“CSR”) of 60 to 65 and Rank of 1.1% RoVmax.
- Overall, project fundamentals are positive. In particular, ash contents are low, which is a very desirable characteristic for blending coals.
- Carbon Creek’s PFS predicted an operating cost of $110/t, which in nominal dollars (taking account for inflation) is predicted to be $116/t in 2016. This places Carbon Creek in the upper half but close to mid-way in the global cost curve (Figure 2) at the 46th percentile.
As part of the Study, Wood Mackenzie also provides insight into the global metallurgical coal market and expected trends during construction and operation of the proposed Carbon Creek Mine:
- Annual HCC demand is forecast to rise from a 2012 level of 150 million tonnes (“Mt”) to 230Mt in 2030.
- Currently the metallurgical market as a whole is seeing a slight oversupply, but additional mines need to come online by 2022 to address expected future supply shortfalls.
- Quarterly pricing for HCC has dipped below marginal production cost, reaching the 90th percentile on the global cost curve, and prices are expected to bottom during Q3 2013.
- An average price (2012 dollars) of $180/t is expected in the period 2014 to 2020. This is in line with Cardero’s assumed baseline prices used in the Company’s 2012 Prefeasibility Study.
- In Wood Mackenzie’s analysis, pricing is forecast to increase through the proposed production period. Prices beyond 2020 are expected to respond to higher production costs and will reach $225/t by 2030 (2012 dollars).
- Future trends in export metallurgical coal quality will be influenced by the finite nature of high quality metallurgical coal deposits. In the coming years, exported metallurgical coal quality will likely increase in ash content (up to an estimated 10% to 12%), resulting in lower quality products, particularly with respect to key FSI and CSR. The most notable feature of the Carbon Creek coals is a low ash, with HCC washing to 4.0% to 6.0% ash content.