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Caledon’s Revolutionary Cook Colliery

Caledon Coal Pty Limited acquired Cook Colliery, situated 30 kilometres south of Blackwater in Central Queensland, Australia, from Xstrata Coal Australia in 2006. SRK Consulting (Australasia) supported Caledon’s acquisition by completing a due diligence and compiling a Competent Person’s Report to list and raise equity finance on AIM in London.

Using the mining method dubbed “Linear Mining” is a first for Australia although variations have been used extensively in South Africa and the US (SRK in South Africa completed a technical due diligence on the mining system in early 2006). The method uses a totally automated system, known as “Magatar” with Prairie Mining’s “Flexiveyor” continuous haulage system, a belt storage magazine, mobile tail-end and expandable belt support cartridges. Cook Colliery is employing Voest-Alpine ABM25 bolter-miners to simultaneously cut and bolt ahead of the continuous haulage system. The separate units are based on proven technology, for example, the Flexiveyor system has been used in potash operations in Canada.

Caledon Coal expects in the order of about 1 million tonnes a year for each operating system – a breakthrough production level for continuous miners in Australia.

This revolutionary mining method lends itself to increased production capacities with the flexibility of underground continuous miner operations in more faulted reserve areas. The Magatar mining system and linear mining approach are highly applicable to Cook Colliery, where attempts to effectively implement longwall methods have failed in the past. Panel layouts are designed to maximize extraction with minimum tramming and relocation of equipment. Preliminary investigative work by SRK Australasia further indicates that pillar extraction is a possibility, which can significantly increase extraction factors – although this is a topic for further investigation.

Magatar Mining carried out extensive simulation exercises in South Africa with a comparative underground bord-and-pillar panel and claims the following improvements:

• Doubling or tripling production rates depending on mining height
• Decrease of 15% to 33% in operating cost
• Reduction of manpower requirements between 25% and 30%
• Decrease of equipment maneuvering by approximately 60%

As a new entrant to the coal industry, Caledon Coal’s progressive thinking is designed to minimize risk and reduce cost, but also to secure access to well-established services on site from within the industry. A sub-lease agreement with Cook Resource Mining Pty Ltd and Xstrata (the former owner and parent company of Cook) gives Caledon exclusive rights to produce coal from the Cook Mining sub-lease area and exclusive rights to use the established Cook Resource Mining coal preparation plant on a unit-rate basis.

Under the agreement, Xstrata is responsible for any environmental liabilities that arise in relation to their operations before the acquisition, while Caledon Coal assumes responsibility for any potential environmental liabilities of its operations after the acquisition. Caledon Coal also entered into a water lease agreement with Cook Resource Mining for right of access to water supply for mining activities.

Through a marketing services agreement, Xstrata markets and sells Cook Colliery coal on behalf of Caledon Coal; Xstrata is expected to secure the best possible sales price considering product quality and current market conditions, and it retains the right to acquire the coal if required. The marketing services agreement continues for the term of the mining sub-lease agreement. A logistics agreement with Xstrata provides for cooperation in securing rail and port capacity for the Cook Colliery’s coal production over the term of the sub-lease.

Caledon Coal also owns rights to the Minyango deposit adjacent to Cook Colliery, which offers significant reserve potential and a synergistic opportunity for using infrastructure and other facilities.

SRK Brisbane:

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