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RI: You've just released a preliminary economic assessment (PEA) on your Border project in Saskatchewan. What did it tell you?
EF: It shows that the economics are positive. It took about a year to do this report—we went into great detail. A lot of that was looking at and analyzing the coal quality. When we pulled it apart and looked at the coal quality we decided that the best path forward right now is to look at coal-to-liquids instead of power generation.
RI: Everyone has heard of coal-to-liquids but people might not know how profitable it can be. What did the engineers and qualified people who did the report tell you about that?
EF: The engineers and qualified people, Marsden and EBA Engineering, are both highly qualified companies. We took what we wanted to bring to the market with proven technology and coal-to-liquids has been around since WWI, when Germany had to use it to convert fuels. Looking at Border right now and the current resource, which is about 170 million tonnes of indicated, inferred and speculative resources, we are looking at about $250 million per year net profit after operating costs with a 30 year mine life.
RI: There has been a lot of work and there has been some mystery as to this is a new type of deposit. Coal tends to lie relatively flat in large deposits and you've got a number of very deep deposits that are discreet?
EF: Yes. Several of our seams are over 100 metres thick.
RI: In reality there is a lot of work to do here and some of it comes down to metallurgy, doesn't it?
EF: Yes. There is a huge amount of work . Looking at the coal quality and the market and we want to use a proven technology. There are a lot of technologies out on the market right now that are being proven at this moment that require a lot less capital costs and a lot less operating costs. There is a huge push in the market worldwide for coal-to-liquid technology with the current fuel prices. If you look at all of the discussions on oil most countries are through their peak of oil production and are now on the downside and so we're going to have to start replacing that with a different alternative and coal-to-liquids should be front and centre.
RI: As you said coal-to-liquids has been used since WWI and it's not a new technology so essentially you should be able to take your coal and use the coal to liquid technology and turn it into diesel fuel without rewriting the book on the process?
EF: Why it has lagged in modern use has been the cost per barrel. Using proven technologies, it costs about $40 per barrel to process coal-to-liquids. When your cost for oil production is $5 to $10 per barrel previously it was unattractive, but now it is, because oil costs continue to rise.
RI: What do you need to do next to show investors that coal-to-liquids technologies can be economic with this deposit?
EF: We've already broken ground as of today to start a bulk sampling program. We need to collect anywhere from 5 to 10 tonnes of coal, which then has to be tested by several different labs. Power generation is still an alternative at Border Coal—and several different technologies, some of which are proven, and some are being proven.
RI: When can we expect to hear about the results of these tests?
EF: The bulk sampling will occur over the next two months and the results of that bulk sampling will be available this year.
RI: How dedicated is the team to making this project happen?
EF: This is an energy resource. This is a new trend, a new district and a new story that is just getting going. If you go back and look at the history of the Border coal discovery, which was made in April of 2008, there was this huge frenzy of exploration interest that occurred around the Border Project for about three months and then we had the world market crash and everybody disappeared. Now they are re-collecting to come back.
We also have a 25 percent interest in another company called Westcore. They are our neighbor and we're watching what they're doing—they are drilling right now and just had some impressive results with 80 metre type intercepts of thermal coal.
RI: You've got a resource size of 175 million tonnes with a mine life of about 30 years, how much room for growth is there still in the deposit?
EF: We've only explored about 10 percent of the land package that we currently have. We could easily double it. We developed a proprietary geological package and we're using that to define more coal deposits and this year—depending on financing—we'll have an opportunity to go out and do some more exploration.
RI: It's only taken you three years to prove up 175 million tonnes, how long will it take you to double it?
EF: I think it would take another year.