October 14, 2008 Announced that the results of an independent technical report confirming resources and reserves for the Appolo Fuels mines. The report, undertaken by Norwest Corporation for Homeland Energy Group, confirms a measured and indicated mineral resource of 114 million short tons (103 million metric tonnes) with a saleable mineral reserve of 45 million short tons (41 million metric tonnes). Norwest’s technical report supports a net present value of US$353 million for the Appolo mines, pretax constant dollar as at January 1, 2009. Assumptions include:
• Long term coal price of US$90 per short ton (Free on Board rail car),
• Cash operating costs ranging from US$60 per short ton in the early years to $70 and $80 per short ton in the latter years,
• Capital expenditures ranging from $2.3 million in the earlier years to $10 million in mid years and decreasing again towards the end of the mine life, and
• 15% discount rate and a zero rate of inflation applied to both costs and coal prices.
To estimate proven and probable mineral reserves, Norwest applied a 25-year mine plan to both the surface and underground Measured & Indicated resources. Total proven and probable reserves are estimated at 40.64 Mt for total clean underground and surface reserves.
Within the Appolo property there are approximately nine coal zones. These coal zones are further divided into major and minor coal horizons. Overall resources were estimated for 29 different coal horizons.
Appolo has been operating on these properties since 1972, with total production in 2005, 2006, and 2007 being 1.3 million (M), 1.3M, and 1.2M clean short tons, respectively.