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First Coal Eyes Near Term Production with 1 million + MT

First Coal Corporation is a private Canadian company exploring on and developing coal properties in north-eastern British Columbia, Canada. First Coal has more than 90,000 hectares under tenure licence or under application for licence in the Peace River Coalfield. First Coal will be the first company in the world to mine coal from narrow, steeply dipping seams using a method that combines the development of trenches and coal extraction using the ADDCAR Any Dip Highwall Mining System. The Company is extracting bulk samples in Q1 2010 using this technique and expects to begin full production in 2013.

Resource Intelligence: Doug, you are exploring in two project areas in central British Columbia called Central South and South Cirque. Let’s begin by describing each of these project areas, the type of coal on each and any resources that you have found.
Doug Smith: These are the first two of the properties that we have and that we will be developing. Both are located in North Eastern British Columbia. The Central South Coal Project has approximately 80 million tonnes of metallurgical coal resources, about half PCI and half medium-volatile hard coking coal. And then to the south of that project is a property known as South Cirque, which has historic resources of over 500 million tonnes of metallurgical coal.

RI: Based on the resources you have to date at Central South, how long of a mine life would this be?
DS: The mining technique we have chosen is an innovative concept of trench mining with high-wall mining equipment. We will be creating trenches on 600 metre centres and mining into the high-walls of the trenches with remote controlled underground mining equipment. At this stage we have designed the trenches down to 50 metres in depth and with that we see a 12-15 year mine life at Central South. We also have the potential to go up to 100 meters in depth and that would extend the life of the mine.

RI: That’s huge. Will the approach that you are taking with this new technique using the trenching equipment actually save you money?
DS: We believe so. The concept would create a smaller environmental footprint, which in our case means greater cost efficiency. Also, because we’re mining trenches instead of more traditional methods of mining, we will be mining less overburden, which means a strip ratio between 4:1 and 5:1. The combination of those two reduces the overall cost of the operation.

RI: What would the per tonne operating costs be when mining with this method?
DS: Our studies at the moment show that our delivered costs onto the vessel at Prince Rupert are about $91 Canadian per tonne. Prices for coal are usually quoted internationally in US dollars.

RI: Your last resource size was estimated at 81 million tonnes in all categories on the Central South deposit. What is the price of similar metallurgical coal on North American markets?
DS: Right now, the contract pricing is in the USD$129 per tonne range for hard cooking and for PCI coal – it’s about USD$90 per tonne. Spot prices are much higher. We think our deposit has about 50% PCI and 50% coking coal. But, while these prices are acceptable to us, we’re certainly looking at the price of coal continuing to recover as analysts suggest it will, towards pre-recession levels, which were much higher than today’s contract prices. The expectation is that these prices will rise in 2010 and remain relatively strong in the years following that.

RI: What is the geometry of the deposit like?
DS: These deposits are multiple steeply dipping seams.We have inclines and anticlines dipping 50 to 90 degrees along strike. The strike runs northwest to southeast, around 10 km at Central South, so what we see are seams extending continuously through the strike zone. We put trenches on 600 metre centers and then we can mine into the high wall from within the trenches. We have designed the equipment to mine in horizontally 300 metres. We believe the South Cirque property to be of very similar geology.

RI: Have you begun to consider marketing the product and sending samples to prospective contracts?
DS: We have sent small sized samples to potential customers. We have done coking tests at a facility in Pittsburgh and we have specifications on the washed coal as well as the produced coke. We are just now beginning to send samples out to customers.
We’re in the process now of taking a large bulk sample from the Central South deposit. The purpose is first to test the mining equipment in the regional geology, to be sure it operates as expectedand second we need to provide large bulk samples for commercial purposes..

RI: You recently applied for an environmental assessment for the South Central project. What is involved with that and how long will it take?
DS: We are just in the process of applying for that. It could take 16-20 months to complete, so we would hope that by the end of 2011 we will have completed the environmental assessment process and have completed the permitting process for the mine itself.

RI: What aspects of the team that you’ve put together gives you bragging rights?
DS: We have a management team that has many years in both the coal industy, and the mining industry in general. As for myself, I have been involved in the coal industry for over 30 years having worked with Luscar Ltd in Canada and Andalex Resources, Inc in the United States. Our COO Peter Stokes has over 45 years of experience in both metal mining and coal mining throughout the world. He started his career with the National Coal Board, then came to Canada and worked with Kaiser Resources and Westmin Resources for a period of time and then his own consultancy for years, working on projects around the world. Our CFO Alan Ahlgren worked at Kinross Gold in the past, and finally our VP of engineering Bruce Briggs, has extensive experience with coal and metal projects around the world.

RI: So it’s a team with substantial experience—particularly in coal mining. What has your experience been like working with the communities?
DS: Very positive. Our focus and commitment is to hire First Nations companies and First Nations individuals from the surrounding area at every possible opportunity. In my experience, I know that our presence in the Chetwynd area can provide substantial benefit to the community in the way of jobs and economic stimulation.

RI: What about South Cirque project? You said this has 575 million tonnes of historical resources. How much drilling and metallurgical work have you completed?
DS: The historical resources were determined in the early 1980s. We have drilled 15-20 drill holes ourselvesand we’re planning a full scale drilling program there over the next couple years.

RI: It certainly sounds like you have a lot of energy focused on the Central South project. Can you project when you’ll be in production there in a base case scenario?
DS: First of all, we are just about to release our scoping study this month. The next big step is to complete the environmental assessment process and permitting process in early 2012, then making a production decision immediately afterward. In that case, we would commence production in 2013 and South Cirque would follow behind that by 2016.

RI: How well financed are you in the meantime to get yourself through that scoping study and into the next phase?
DS: We have raised $63 million to date on the project, we have about $7 million remaining as we finish the bulk sampling. Once that is completed, we will begin the next fund raising so that we can complete the environmental assessment and further exploration on Central South and South Cirque. We own two drill rigs; our plan is to resume exploration with those rigs as well as contract rigs, so that we can maintain a rapid pace of resource growth.

RI: How did you manage to do all of this as a private company Doug?
DS: We developed a solid business plan with an experienced group of mining professionals. We were able to weather the storm of 2008 by slowing our activities but we are still on track with our business plan. I think that’s a testament to our strength as a company.

RI: So in speaking to investors how would you ask them to evaluate First Coal?
DS: We are still an exploration and development company. As we come out of this next financing and complete thepermitting planned, we will move then into a producing company around 2013.We are a company with an innovative mining method that offers the potential of lower costs in the metallurgical coal market. We are poised to come into production and the demand for our product is strong. North Eastern BC is one of the few places in the world where transportation infrastructure exists with ample available capacity to move quality resources into the international markets.

Milestones:

* Scoping study available by mid-March 2010
* Financing activities in Q2 2010
* Environmental Assessment and production decision by Q1 2012
* Construction commences Q1 2012
* Central South production 2013, South Cirque production 2016

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First Coal Eyes Near Term Production with 1 million + MT

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