Hillsborough Resources Limited

Hillsborough Resources Limited

December 06, 2007 12:49 ET

Hillsborough Expanding Production at Quinsam Mine as Global Coal Price Heats Up; New Mining at 2 South Starts in December

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Dec. 6, 2007) - Hillsborough Resources Limited (TSX:HLB) today reported that mining will commence from 2 South Pit at Quinsam Mine this month to yield approximately 40,000 tonnes thermal coal (60,000 tonnes of run-of-mine coal) and should take approximately three months to complete. Mining this small extension of the 2 South Pit, which also accelerates the reclamation schedule for this old pit area, is the first of a multi-part strategy to expand production in light of rising international coal prices.

Thermal coal prices are continuing to climb and trades occurred above $90/t FOB in November reaching a high of $101/tonne reported in McCloskey's Coal Report on November 23rd. The thermal coal market is looking extremely positive going into 2008.

Hillsborough's CEO, David Slater, commented, "We are ramping up production at Quinsam Mine to add more tonnage for export at these significantly higher prices. Next year, Hillsborough will see a substantial increase in revenues and profits from new export sales in 2008."

2008 Action Plan - Quinsam Mine Production Increase

Hillsborough has plans in place to increase production in 2008 up to 850,000 tpa. Of that, 450,000 tonnes would go into the export market. Hillsborough plans to continue ramping up mine production to 1,000,000 annual tonnes.

Mining from current operations will be expanded 26% from 500,000 tpa to 630,000 tpa of which 230,000 tonnes would be available to the export market. This 26% increase in tonnage (the base case increase) is now possible by mining the newly developed extensions at Quinsam Mine in 1 Mains and 5 South.

As has been previously reported, several other projects are in various stages of evaluation and development such that one or more options are readied to generate additional production at the Quinsam Mine during 2008 (220,000 tpa) and onwards to further take advantage of the robust thermal coal market.

7 South Bulk Sample - This project is designed to produce 100,000 tonnes of 4 Seam product to initiate market development for a blended product using 4 Seam and current 1 Seam production. This project is in the regulatory review process. The review process is well advanced; we expect approval late in January. Given successful introduction of this product and receipt of regulatory approvals, a larger open-pit has been identified that could produce about 2 million tonnes of product over a four to five-year period.

4 South Underground Mine - 4 South is a developed mine which has been on 'care and maintenance' for three years, with production focused on the current operations. The 4 South Mine is seen as Hillsborough's best opportunity to ramp up overall mine production in 2008 at Quinsam. Although the coal seam here does have a higher sulphur content than what is currently produced at Quinsam, it can be blended with coal from 1 Seam to produce an intermediate grade sulphur content product. Such products are purchased today by many potential customers since many combustion systems are now designed to remove sulphur. Reopening this mine will require the purchase of additional equipment which is expected to be available from the used market. 4 South could be operational by mid-2008.

Quinsam Plant Improvements - A wash plant review has identified that capital expenditures of about $1.5 million would achieve substantial process and plant improvements that would significantly increase recovery rates and have a positive affect on the Corporation's bottom line. Upgrades have already begun on the wash plant and work is underway to establish new design parameters so that design work can follow on further system modifications. With lead times of six months to procure new equipment, the completion of the plant improvements is forecasted for mid-2008/third quarter.

Quinsam North

As previously reported, Quinsam North has been identified as having potential for replacement of the current mine when its reserves are depleted. To this end, two initial drilling programs were completed and now the Corporation has planned an in-fill and step-out drilling program to delineate resources for feasibility purposes. This drilling program would also obtain additional core samples for coal quality and geotechnical assessments. Once this new data is obtained and geological models are developed, a more detailed feasibility program would commence. Quinsam is targeting completion of the feasibility study later in 2008. Should development be recommended by that study, the project would then begin the regulatory review process. Quinsam is conceptually looking at phasing in Quinsam North concurrent with phasing down the current mine starting in 2012.

Labour Contract Ratified at Quinsam

Quinsam and the Steelworkers' union recently signed a three-year extension to their labour contract.

About the Corporation

Hillsborough Resources Limited is a coal mining company that operates the Quinsam underground thermal coal mine in Campbell River, British Columbia, serving the local and west-coast U.S. cement industry. The Corporation is a limited partner in the Peace River Coal Limited Partnership, which has substantial metallurgical coal properties both in production start-up and under development near Tumbler Ridge, British Columbia. In addition, the Company is developing the proposed Wapiti thermal coal mine in the same region. Hillsborough also holds the Bingay Creek metallurgical coal property located in the Elk Valley region of southeast British Columbia. Shares of the Corporation are listed on the TSX under the symbol "HLB."

Forward-looking statements: This news release may include statements that are "forward looking" in nature. These statements are subject to risks and uncertainties. They can be identified by use of words such as "believes", "expects", "plans", "projects", "estimates", and other words of similar meaning. They can be identified by the fact that they do not relate strictly to historical or current facts. Many factors could cause actual results to differ from these forward looking statements, including inaccurate assumptions and a broad variety of other risks and uncertainties, including some that are known and some that are not. Specific events which may cause results to differ from those results predicted, but are not limited to, include unexpected increases in the costs of producing coal, interruptions in the ability of the Corporation to produce coal from any of its mines, changes in international coal or transportation markets, a rapid appreciation of the Canadian dollar versus the U.S. dollar and a fundamental slowdown in the North American or Asian economies. Statements relating to the size, grade and quality of Hillsborough's coal deposits are deemed to be forward looking statements. The reliability of such information is affected by, among other things, uncertainties involving geology of mineral deposits; uncertainties of estimates of their size of composition; uncertainty of projections relating to costs of production; the possibility of delays in mining activities, changes in plans with respect to exploration, development projects or capital expenditures; and various other risks including those relating to health, safety, and environmental matters. Those risks that are known are summarized in Hillsborough Resources Limited's most recent Annual Information Form filed with Canadian securities regulatory authorities. No forward-looking statement can be guaranteed and actual future results may vary materially. The Corporation does not assume the obligation to update any forward looking statement.

Contact Information

  • Hillsborough Resources Limited
    David Slater
    President & C.E.O.
    (604) 684-9288
    Hillsborough Resources Limited
    David A. Fawcett
    Senior Vice President Development
    (604) 684-9288 ext. 224
    (604) 684-3178 (FAX)
    Email: david.fawcett@hillsboroughresources.com
    Website: www.hillsboroughresources.com
    CHF Investor Relations
    Cathy Hume
    (416) 868-1079 ext.231
    Email: cathy@chfir.com
    CHF Investor Relations
    Christopher Haldane
    Associate Account Manager
    (416) 868-1079 ext.237
    (416) 868-6198 (FAX)
    Email: chris@chfir.com