Logistics and Operating Costs
On December 14, 2012 Coalspur announced that it had entered into a binding legal agreement with CN which outlined the key terms for a definitive rail transportation agreement. The agreement will have a seven year term, commencing in 2013. In terms of the contract CN will supply the equipment to transport coal from Vista to tidewater and there will be no "take or pay" exposure for Coalspur. The haulage rates and price escalation agreed with CN represent significant savings from the rates quoted in the Vista Feasibility Study.
As a result of the agreement with CN, Coalspur's logistics' costs, which include port handling charges at Ridley Terminals Inc. (" Ridley Terminals") and haulage rates with CN, are now contractually defined until 2020. The agreements in place with CN and Ridley Terminals provide a high degree of certainty in Coalspur's future operating costs as approximately 50% of Coalspur's projected free on board (" FOB") costs are represented by logistics.
The logistics costs for Vista will average C$30.81 per tonne over the first five years of production and C$31.40 per tonne at full production of 12.0 million tonnes per annum (" Mtpa"). These costs are respectively C$1.88 per tonne and C$2.29 per tonne lower than estimated in the Vista Feasibility Study.The finalised terms with CN reduce the projected total FOB operating costs for Vista to C$56.98 per tonne in the first five years of production. The FOB costs are projected to be C$59.55 per tonne in the first ten years of production and C$66.40 per tonne over the life of the mine. Vista Project and Engineering Detailed engineering studies for Vista are ongoing and the Company is preparing for civil earthworks and mine pre-development work to commence in the second quarter of 2013. The initial bid packages for the load out area, rail siding grading and drainage, access roads, plant site grading, surface water management and haul roads have been issued to pre-qualified contractors. Firm bids for this work are expected in early 2013. The bids will be evaluated and contracts will be awarded in time to mobilise equipment ahead of the final approvals to start construction.
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