Amalfi Capital Corporation

February 22, 2010 20:23 ET

Amalfi Capital Corporation Announces the Completion and Update of CDR Minerals Inc. National Instrument 43-101 Reports

CALGARY, ALBERTA--(Marketwire - Feb. 22, 2010) - Amalfi Capital Corporation (TSX VENTURE:ALI.P) ("Amalfi" or the "Corporation") is pleased to announce that CDR Minerals Inc. ("CDR") has received an updated technical report (the "Updated Sid Report") dated January 20, 2010 with respect to the Sid mining project (the "Sid Project") and an updated technical report (the "Updated Big Branch Report") dated January 21, 2010 with respect to the Big Branch mining project (the "Big Branch Project"). Both reports were updated by Summit Engineering, Inc. ("Summit") to include coal reserve valuations, as described below. CDR has also received a technical report (the "Laurel Fork Report") dated January 20, 2010 with respect to its Laurel Fork (Coty) mining project (the "Laurel Fork Project"). The technical reports were prepared by Phillip Lucas, P.E., P.L.S. of Summit in accordance with National Instrument 43-101 ("NI 43-101").

Information concerning the originally filed Sid Report and Big Branch Report was previously disclosed by the Corporation in its press release issued on November 26, 2009. Full text versions of the Updated Sid Report and the Updated Big Branch Report have been filed on SEDAR and are available at

As previously announced on June 9, 2009, November 26, 2009, December 21, 2009 and January 6, 2010, Amalfi intends to complete an arm's length business combination (the "Business Combination") with CDR, which if completed, is expected to constitute Amalfi's qualifying transaction for purposes of Policy 2.4 of the TSX Venture Exchange Inc. ("TSX Venture") Corporate Finance Manual. The parties intend to complete the Business Combination by way of a three-cornered amalgamation (the "Amalgamation), wherein a wholly-owned subsidiary of Amalfi will amalgamate with CDR and continue as one company under the Business Corporations Act (Ontario) ("Amalco").

The Laurel Fork Project

CDR entered into certain coal and surface leases (collectively, the "Laurel Fork Lease") with a local property owner on December 12, 2008 for a purchase price of $125,000 and varying overriding royalties from all sales of all coal mined from the property under the lease agreements.

CDR holds the Laurel Fork Lease within the Laurel Fork Project area of interest (the "Laurel Fork AOI"), located proximate to Hazard, Kentucky. According to CDR, it is expected that the wider Laurel Fork AOI can be leased for minimal coal lease prepayments plus out of pocket expenses. The process of obtaining permits for the Laurel Fork AOI is underway.

The Laurel Fork Project is located within Knott County, Kentucky, primarily in the Vest and Carrie USGS quadrangle maps. The seams to be evaluated include the Fireclay (Hazard #4), Hazard #5A, Hazard #7, Hazard #8, Hindman (Hazard #9), and Skyline (Hazard #10). The total project area covers approximately 2500 acres. The area covered by the Laurel Fork Report (being the entire Laurel Fork AOI) is bounded to the north by Balls Fork, to the south by State Route 80, to the east by Trace Branch, and to the west by Short Fork and Rock Lick.

Currently all surface mining operations on the Laurel Fork Project are idle. CDR has determined that it will proceed with obtaining a permit for a new surface mine on the lease it controls, which it anticipates will take approximately 12 months to obtain. Presently, 18 coreholes have been drilled in the Laurel Fork Project area, five of which were drilled by CDR. No additional corehole drilling is planned at this time.

Laurel Fork Report

The following is information extracted from the Laurel Fork Report. A full text version of the Laurel Fork Report has been filed on SEDAR and is available at

According to the Laurel Fork Report, the work done to prepare the two prior existing results estimates in respect of the Laurel Fork Project area which were reviewed by Summit was not sufficient to classify the historical estimates as current mineral resources or reserves in accordance with NI 43-101. Summit has used the Canadian Institute of Mining, Metallurgy and Petroleum ("CIM") Definition Standards on Mineral Resources and Reserves ("CIM Definitions") adopted by the CIM Council on December 11, 2005 during the classification, estimation and reporting of mineral resources and reserves for the Laurel Fork Project.

According to the Laurel Fork Report, in calculating the in-place and recoverable tons for potential mine site areas on the Laurel Fork Project, potential reserve areas were created by Summit in SurvCADD, which is a computer modeling program that utilizes three-dimensional analysis to estimate reserve volumes. In-place tons are calculated by the computer based modeling of applicable parameters (seam thickness and elevation). The model is interpolated, using mostly core data, by the inverse distance squared method. Coal density was assumed to be 80 lbs per cubic foot and rock density was assumed to be 160 lbs per cubic foot.

According to the Laurel Fork Report, Summit did not conduct any field work for the preparation of the report and relied on the results of exploration documented in the previous historic records reports, including drillhole database, mapping, and other information. Of the general sources of information used in the Laurel Fork Report, Summit reviewed on-going core drilling data, previous coal reserve estimates, mine permit data, economic analyses, and coal quality information provided to Summit by CDR.

Staff of Summit conducted two site visits to the Laurel Fork Project and reviewed the previous mining which had been conducted on the mineral property, the proposed mine plan, the proposed backfill plan and the site access roads.

According to the Laurel Fork Report, the core samples collected and submitted for analysis were handled using methods that are standard for the coal industry. The standard method of coal core handling is for the drillers, once the cores are retrieved to the surface, to place the cores in core boxes designed to accept core of the diameter being drilled. Samples are then trucked from the field to independent laboratories for sample testing.

The sample data received by Summit from CDR originated from Mineral Labs, Inc. in Salyersville, Kentucky using methods of analysis consistent with ISO/IEC 17025 Standards, and Acculab Coal, Water and Soil Testing Laboratory in Hazard, Kentucky using Government of Kentucky approved methods of analysis. Certain data verification procedures were typically employed in order to derive a level of confidence with respect to the integrity of these samples, including, the use of sample labels, sample seals and chain-of-custody recording of the samples.

Resource And Reserve Classification

Potential reserves were classified by Summit as surface mineable (area, point removal and contour mineable), highwall mineable, or auger mineable reserve. Summit based its Laurel Fork Project calculations on coal seam thickness instead of total seam (coal plus rock) thickness. Therefore when estimating the recoverable tons, a mining recovery factor was used, and no plant loss was taken into consideration. The mining recovery factor for area, point removal and contour mineable reserves were calculated as 85% of in-place tons for all seams. Reserves classified as highwall mineable had a mining recovery factor of 45% of in-place tons for all seams, and reserves classified as auger mineable were given a mining recovery factor of 30% of in-place tons for all seams.

According to the Laurel Fork Report, exploration data on the Laurel Fork Project currently under lease allows for all reserves to be classified as either proven or probable reserves. According to Summit, lease negotiations may add potential inferred resources to the property. Potential inferred resources are reported as an in place tonnage and not adjusted for mining losses or recovery. Minimum mineable seam thickness and maximum removable parting thickness are considered; coal intervals not meeting these criteria are not included. Resource tons are estimated by the average thickness times area method. The area is calculated by Summit from the SurvCADD generated coal seam outcrop and by potential lease lines, and the average thickness is assumed to be approximately equal to the average thickness generated for measured and indicated reserves.

The following table details the results of Summit's reserve estimation as of January 20, 2010.


Estimated Reserves & Resources
Mineral Resource Tons Mineral Reserve Tons
Seam Measured Indicated Inferred Proven Probable
10 226,088 0 0 192,175 0
9 1,142,145 155,807 0 970,823 132,436
8 2,366,384 1,246,001 75,419 2,011,426 1,059,101
7 0 0 958,070(1) 0 0
5A 0 0 0 0 0
4 1,000,710 2,029,180 2,307,251 529,802 1,083,201
Sub Total 4,735,326 3,430,989 3,340,740 3,704,226 2,274,738
Totals: 8,166,315 5,978,965

According to the Laurel Fork Report, Summit's reserve evaluation indicates that there is an excess of eight million measured and indicated resource tons on the property. Approximately 1.7 million tons are controlled under lease. A portion of the reserves on properties pending lease are classified as inferred (resource) tons. With additional exploration, the reserve base may be expanded. As of the date of the Laurel Fork Report, no permits had been obtained for this property. Both Kentucky Surface Mine Control and Reclamation Act permit ("SMCRA Permit") and a United States Army Corp of Engineers 404 permit ("404 Permit") will be required for the operation. Approximately 330,000 tons within the leased properties may be mined without the need of a 404 Permit. Adjacent tracts contain about 600,000 tons that may be mined without the need of a 404 Permit. These areas will still require a SMCRA Permit, and the permit process should begin as soon as possible in order to have the permit issued in a timely fashion. Thus, according to the Laurel Fork Report, it could be approximately two years before the need for a 404 Permit will arise.

As of June 30, 2009, the Kentucky Office of Mine Safety and Licensing listed 30 licensed mining operations in Perry County, Kentucky. The counties surrounding and adjacent to the Laurel Fork Project in Knott County include Perry, Letcher, Magoffin, Breathitt, Floyd and Pike Counties. Another 250 mines are licensed in these counties making a total of over 300 mines licensed in the area. There has been no historical production on the leased properties acquired by CDR. However, on the adjoining property to the Laurel Fork Project, up to 50,000 tons per month had been produced by various operators. These properties are currently in reclamation. According to the Laurel Fork Report, the most recent production records from the state of Kentucky are through to the end of 2007, and they indicate that a total of over 63 million tons of coal was produced from the seven county region near and adjacent to the Laurel Fork Project.

Coal Reserve Valuation

According to the Laurel Fork Report, a coal reserve valuation estimate was performed for the Laurel Fork Report. Similar valuation estimates were also conducted for the Updated Sid Report and the Updated Big Branch Report. Based on the information available to Summit, the approach chosen for the valuation estimates in each of the Updated Sid Report, Updated Big Branch Report and Laurel Fork Report utilized net present value ("NPV") estimates of royalty income from leasing.

According to each of the Laurel Fork Report, the Updated Sid Report and the Updated Big Branch Report, a discount rate of 15% was chosen for these estimates. The following table outlines the valuation estimates of the Laurel Fork Project along with the Sid Mining Project and Big Branch Mining Project. This valuation represents the estimated NPV of the income that will flow to the mineral owner. The estimated NPV of the coal reserves associated with the Laurel Fork Project is approximately $6 million, with the Sid Mining Project is approximately $9 million and with the Big Branch Project is approximately $22 million. The total estimated NPV of the coal reserves associated with the CDR assets in aggregate is approximately $37 million.

Valuation of Coal Reserves - January 20, 2010
Sid Mining Project

2010 2011 2012 2013
Projected Coal Production 341,100 543,900 595,000 595,000
Estimated Coal Sales Price $ 70 $ 74 $ 78 $ 78
Estimated Revenue $ 23,877,000 $40,248,600 $46,410,000 $46,410,000
Royalty Income at 6% $ 1,432,620 $ 2,414,916 $ 2,784,600 $ 2,784,600
NPV at 15% Discount Rate $ 1,245,757 $ 1,826,023 $ 1,830,920 $ 1,592,104

2014 2015 Total
Projected Coal Production 595,000 595,000 3,265,000
Estimated Coal Sales Price $ 78 $ 78
Estimated Revenue $ 46,410,000 $ 46,410,000 $ 249,765,600
Royalty Income at 6% $ 2,784,600 $ 2,784,600 $ 14,985,936
NPV at 15% Discount Rate $ 1,384,438 $ 1,203,859 $ 9,083,102

Big Branch Project

2010 2011 2012
Projected Coal Production 1,057,100 1,200,000 1,200,000
Estimated Coal Sales Price $ 67 $ 74 $ 78
Estimated Revenue $ 70,155,700 $88,800,000 $ 93,600,000
Royalty Income at 6% $ 5,612,456 $ 7,104,000 $ 7,488,000
NPV at 15% Discount Rate 4,880,397 5,371,645 4,923,482

2013 2014 Total
Projected Coal Production 1,200,000 723,304 5,380,404
Estimated Coal Sales Price $ 78 $ 78
Estimated Revenue $ 93,600,000 $ 57,197,712 $ 403,243,412
Royalty Income at 6% $ 7,488,000 $ 4,575,817 $ 32,268,273
NPV at 15% Discount Rate 4,281,288 2,274,990 21,731,801

Laurel Fork Project (Gayheart Leases Only)

2010 2011 2012 Total
Projected Coal Production 30,000 670,000 737,500 1,437,500
Estimated Coal Sales Price $70 $74 $78
Estimated Revenue $2,100,000 $49,580,000 $57,525,000 $109,205,000
Royalty Income at 6% $ 168,000 $ 3,966,400 $ 4,602,000 $ 8,736,400
NPV at 15% Discount Rate $ 146,087 $ 2,999,168 $ 3,025,890 $ 6,171,145

Total Estimated NPV of Coal Reserves Associated with CDR Mine
Plan: $36,986,047


(1) Production and Coal Sales Values are from proformas provided by CDR to
(2) Royalty Rates are from existing leases.
(3) A 15% Discount Rate is used for Net Present Value Estimates.

Proposed Exploration and Mining Program

Lexington Coal Company, LLC Permit No. 860-0415, controls a surface mining permit on the western portion of the Laurel Fork Project. The permit was operated by Leslie Resources Inc. from September 1, 1996 until March 19, 2001 when Leslie Resources, LLC took over operations. Production ceased on this permit in 2004, though the Kentucky Surface Mining Information System still lists this permit with an active A1 status. However, Increments 2, 4, 5, 11, 12 and 13, covering a total of 242.34 acres have a Phase 1 bond release.

Most of the reserve left in this area lies in the Hazard #7 seam and below. However, a couple of small areas have been left which may contain the Hazard #8 and above seams. Also, the existing mountaintop removal area located on the Laurel Fork Project leased properties could enhance the overall mine plan by providing excess spoil storage.

Negotiations for the mining rights necessary to conduct surface and underground mining operations within the Laurel Fork Lease portion of the property have been obtained. Negotiation is on-going for other properties that also lie within the Laurel Fork AOI.

According to the Laurel Fork Report, based on the proforma production tonnage, it could be approximately two years until the need for a 404 Permit exists. The current LCC Kentucky permit area will be re-permitted by CDR. This area should have about 330,000 recoverable tons available for mining without the need for a 404 Permit. Also, parts of lease areas 10, 12B and 13 may be mined without the need for a 404 Permit. Excess spoil from these areas may be placed on previously mined areas adjacent to this area. Both surface and mineral leases for these areas must be secured and a SMCRA Permit will need to be issued for the work to be done. These areas could yield another 600,000 tons of recoverable coal. Thus, according to Summit, it is possible to mine close to one million tons without the need for a 404 Permit. A permit is currently being prepared for the area of the Laurel Fork Lease. The application is currently scheduled for submittal in January of 2010.

According to Summit, after a permit is obtained for the properties leased and currently pending lease, the remaining leases for the property area should be obtained and a permit filed for the mineable reserve located to the east of Laurel Fork. The process of obtaining a SMCRA Permit and 404 Permit could take an estimated 12-18 months for this property. Once lease negotiations are concluded, and a SMCRA Permit and 404 Permit has been obtained, mining within the remainder of the property can commence.

The costs associated with completing the drilling of the coreholes is estimated to be US$10,000 per corehole. The anticipated costs associated with future surface mine operations on the Laurel Fork Project are disclosed in the following table derived from the Laurel Fork Report. CDR has allocated approximately $12,000 per month for permitting and other reserve activity, which includes the cost to drill each corehole. The drilling costs, including the use of equipment and footage charges, consumables and the costs of labour and materials, are based on information provided to Summit by CDR. In addition, other support activities including site preparation, water and power supply, the safe removal and disposal of effluent and a survey control site may be required. The costs per corehole for these activities have been generated internally by CDR.

Road Building and Site Preparation US$1,700
Drilling Rig Usage US$6,300
Labour and Materials US$2,000

Recommendations of the Laurel Fork Report

According to Summit, the information it reviewed indicated that there exists a coal resource on the Laurel Fork Project worthy of additional exploration and further development.

Additional leased and permitting for the affected properties will be required, as well as the pursuit of the SMCRA Permit and the 404 Permit for the eastern portion of the property reserve.

Estimates of required capital, manpower, and equipment for the surface mine operations are reasonable. The projected tonnages are reasonable based on the reserves associated with the Laurel Fork Project.

The completion to the present date of any aspects of the feasibility study work that may require time-dependent revision should be addressed. According to Summit, the selling price for the coal has most likely changed since the feasibility work was most recently done.

Summit further recommended that the orderly extraction of the coal reserve in this area should proceed as planned.

Qualified Person

Phillip Lucas, P.E., P.L.S., of Summit Engineering, Inc., a Professional Engineer in the State of Kentucky, West Virginia, Virginia and Arkansas, a member of the Society of Mining Engineers of Kentucky, is the author of the Sid Report and an independent Qualified Person in accordance with the requirements of NI 43-101. He has reviewed and approved the technical disclosure in this news release.

Directors and Officers of Amalco

Upon completion of the Business Combination, the board of directors of Amalco will consist of seven (7) directors. Six of directors nominees of CDR, namely A. Thomas Griffis, Elia Crespo, Scott Hand, John Ellis, James Ladner and Dino Titaro, and one will be a nominee of Amlafi, Michael Rousseau. After the closing of the Business Combination, the officers of Amalco will be appointed by the board of directors of Amalco and will include Robert Heuler as Chief Executive Officer, James Hannah as President, James O'Neill as Chief Financial Officer, Peter K. Moran as Chief Operating Officer, James A. Flores as Executive Vice President Finance and Michael J. Campbell as Executive Vice President Corporate Development and Secretary. Information concerning Mr. Griffis, Ms. Crespo, Mr. Rousseau, Mr. Hannah, Mr. Moran, Mr. Flores and Mr. Campbell was previously disclosed by the Corporation in its press release issued on June 9, 2009.

Scott Hand, age 67 was the Chairman and Chief Executive Officer of Inco Limited ("Inco") from April 2002 and he retired from Inco in January 2007. Prior to that Mr. Hand was the President of Inco and held positions in Strategic Planning, Business Development and Law. Mr. Hand currently serves on the boards of Manulife Financial Corporation and Fronteer Development Group.

John Ellis, age 74, has spent over 45 years in senior management positions, including former Chairman and Chief Executive Officer of Anglogold North America, Independence Mining, Hudson Bay Mining and Smelting, Vice President, Operations for CVRD-Inco PTI Indonesia and Managing Director CVRD-Inco for Voisey Bay Nickel. Mr. Ellis has also consulted for several companies, including CVRD-Inco, Queenstake, BHP-Australia and Century Aluminum.

James A. Ladner, age 70, is a self-employed financial consultant in Kilchberg (Zurich), Switzerland and has been so since 1992. Mr. Ladner was a founder and managing director of RP&C International, London/New York/Zurich from December 1992 to April 2002, where his responsibilities included the syndication and sale of dollar convertible bonds, shares and warrants of North American companies on the European continent. Mr. Ladner has held a variety of senior positions in the financial industry including as non-executive chairman of Bank Austria (Switzerland) Ltd. from 1992 to 2001. Mr. Ladner currently serves as a director and a member of the audit committee of the following companies: bw digitronic AG, Sican Petroleum plc, Oracle Energy, Mohave Exploration and Production and Coastport Capital Inc.

Dino Titaro, age 57, is currently the President and Chief Executive Officer of Carpathian Gold Inc. Mr. Titaro is a geologist with extensive experience in the mining and exploration sector at the officer and director level. Since 1989, Mr. Titaro has been President and Chief Executive Officer of A.C.A. Howe International, a geological and mining consulting firm and worked globally on mining projects. Mr. Titaro has acted as a director and officer of several publicly-traded companies in the mining, industrial and health care technology fields. Mr. Titaro has been a director of Yamana Gold Inc. since 2005 and MinCore Inc. since 2007. Prior thereto he was a director of Richview Resources Inc. from 2005 to 2009, Plata Peru Resources Inc. from 2000 to 2009, Sikaman Gold Resources Ltd. from 1995 to 1999, Compressario Corp. from 2000 to 2005 and OntZinc Corporation (formerly Pan American Resources Inc.) from 1996 to 2002.

Robert Heuler, age 57, has been the Chief Executive Officer of CDR since his appointment in November 2009. Mr. Heuler is a senior executive with 35 years experience in the mining sector, most recently as Managing Director of the Coal Division of Monarch Financial Corporation from 2004 to 2009. Prior thereto, he was Director of Syndication for Citizens Bank of PA, a subsidiary of the Royal Bank of Scotland. Mr. Heuler has also held senior engineering positions with direct responsibilities for engineering and planning on mine sites.

James O'Neill, age 50, has been the Chief Financial Officer of CDR since his appointment in November 2009. Prior thereto, Mr. O'Neill was Vice President, Corporate Controller & Investor Relations for Tiomin Resources Inc. (TSX: TIO), which had mining interests in Kenya, Peru and China. He gained extensive experience with international companies operating in the USA, including as CFO for Azcar Technologies Inc. from November 2001 through October 2005, and as Chief Financial Officer and Vice President, Operations of Arxx Building Products Inc. from February 1997 to October 2001. He qualified as a Chartered Accountant while with KPMG (formerly Ernst & Whinney). He held senior financial positions with Stride Rite Canada, Apple Canada, and Picker International Canada after qualifying as a Chartered Accountant with KPMG.

Conditions Precedent to Closing the Business Combination

The completion of the Business Combination is subject to the approval of TSX Venture and all other necessary regulatory approval. The completion of the Business Combination is also subject to additional conditions precedent, satisfactory completion of due diligence reviews by the parties, board of directors approval of Amalfi and CDR, the entering into of a formal agreement, the entering into of employment and non-competition agreements with certain senior officers of CDR, and certain other usual conditions.

Resumption of Trading

Trading of the common shares of Amalfi is expected to resume on the TSX Venture on February 24, 2010.

As indicated above, completion of the Business Combination is subject to a number of conditions, including but not limited to, TSX Venture acceptance and shareholder approval. The Business Combination cannot close until the required shareholder approval is obtained. There can be no assurance that the Business Combination will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the Information Circular of the Corporation to be prepared in connection with the Business Combination, any information released or received with respect to the Business Combination may not be accurate or complete and should not be relied upon. Trading in the securities of the Corporation should be considered highly speculative.

Except for historical information contained herein, this news release contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially. Neither Amalfi nor CDR will update these forward-looking statements to reflect events or circumstances after the date hereof. More detailed information about potential factors that could affect financial results is included in the documents filed from time to time with the Canadian securities regulatory authorities by Amalfi and CDR.

The securities of Amalfi being offered have not been, nor will be, registered under the United States Securities Act of 1933, as amended, and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons absent U.S. registration or an applicable exemption from U.S. registration requirements. This release does not constitute an offer for sale of securities in the United States.

Neither TSX Venture nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • Amalfi Capital Corporation
    Raymond Ludwig
    (403) 585-0450
    CDR Minerals Inc.
    James Hannah
    (416) 861-8775