Fortune's Lost Fox deposit has 60.8 mt of reserves

Washington (Platts)--18Oct2005

The Lost Fox area of Fortune Minerals Ltd.'s Mount Klappan anthracite project
in northwest British Columbia has 60.8 million tonnes (metric tons) of
reserves and a minimum 20-year mine life, according to a full bankable
feasibility study by Marston Canada Ltd.

The study, released Monday, evaluated production scenarios of 1.5-mil and 3
mt/yr of 10% ash, ultra-low-volatile pulverized coal injection material for
the overseas steel industry and found that proven and probable reserves in
Lost Fox support production of up to 3 mt/yr from an open-pit mine.

"Fortune is pleased to report that the project shows attractive economics for
each of the four scenarios assessed over a range of coal price sensitivities,"
the company said.

Mount Klappan has reserves in four deposits -- Lost Fox, Hobbit-Broatch,
Summit and Nass. They contain total measured resources of 107.9 mt, with 123
mt indicated and 2.572-bil tonnes inferred and speculative. 

Garett Macdonald, Fortune's engineering manager, told Platts Coal Trader
Monday the company's plan is to get Lost Fox into production by the second
quarter of 2008, then follow up on the other areas with more exploratory
drilling.

"The next step is to find a way to get this into production," Macdonald said.
He said Lost Fox was the first area targeted because previous owners had done
the most exploration work on it. "We had a lot of information for Lost Fox.
Once it is up and going, we'll expand our exploration program to the other
three areas."

The study recommends that a wash plant and supporting infrastructure be
constructed at the site. The plant would initially process run-of-mine coal to
produce a 10% ash, ultra-low vol PCI. The plant would also be configured to
produce other premium anthracite products in the future.

The study estimated capital costs of $238-mil to $440-mil (CAN $281-mil to CAN
$519-mil), depending on the production rate at the mine and the amount of
Fortune's participation in a railway upgrade and extension to the property.
Cash costs FOB loading vessel are estimated to average $60-$64 (CAN $71-CAN
$75)/tonne to haul the PCI by truck to Steward or by rail to Prince Rupert,
respectively, and as low as $53 (CAN $63)/tonne in early production years

Two transportation scenarios evaluated

Mount Klappan is about 90 miles northeast of Steward and 205 miles northeast
of Prince Rupert. It straddles the BC Rail right-of-way and roadbed on the
Dease Lake Extension, which provides road access to the site from Highway 37
and connects to Canadian National Railway's main line between Prince George
and Prince Rupert about 90 miles south of the proposed mine. The Dease Lake
Extension connects to CN's main line between Prince George and Prince Rupert.

"The Steward scenario gets us into production faster," Macdonald said. But
Prince Rupert would allow for blending and larger shipments.

The Marston study said additional infrastructure would be required for the
Steward option, the costs of which are included in the study and would be paid
by Fortune. Major items include a 60,000-tonne coal-storage dome and reclaimer
system, a 2,000 tonne/hour ship loader, a new road to the mine site and a
company-owned and operated truck fleet.

The rail option to Prince Rupert, which the study estimated to cost $184-mil
(CAN $217-mil), includes completing and upgrading the existing Dease Lake rail
line from Prince George to the mine. The line would allow products from Mount
Klappan to be shipped through Prince Rupert or transported by rail to other
destinations in North America.

"The cost of transportation was a little bit of a surprise," Macdonald said,
adding that most of the report's other findings were expected. "We were pretty
confident with the geology and the area."

Fortune said it is in discussions with parties who have expressed interest in
participating in the railway extension and upgrade, so the capital cost could
be shared.

Macdonald said Fortune is looking for a joint-venture partner. The company is
currently working through the environmental assessment process. The company
said work should be completed in 2006. 

A partnership co-owned by Fortune is the primary bidder to purchase Ridley
Terminals Inc. in Prince Rupert from Canada's federal government. Ridley owns
and operates the Ridley Island coal terminal.

"The port deal is a deal on its own," Macdonald said. "It wasn't contingent on
Mount Klappan in any way. But it would be nice to have the Mount Klappan coal
going through a port we own a piece of."

-- Mark E. Heckathorn, mark_heckathorn@platts.com

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