PERTH (miningweekly.com) – A bankable feasibility study (BFS) into an expanded Poplar Grove coal mine, in Western Kentucky’s Illinois basin, has proven positive for ASX-listed Paringa Resources.

The company on Tuesday reported that the expanded BFS incorporates a second coal seam at the Poplar Grove mine, which resulted in a 56% increase in mine production.

The expanded BFS estimated that, for a capital investment of $44.7-million, the Poplar Grove mine could be developed into a 2.8-million-tonne-a-year operation, with the all-in operating capital estimated at $29.24/t.

The original BFS considered a 1.8-million-tonne-a-year operation at a capital cost of $40-million.

The expanded operation was expected to deliver average yearly earnings before interest, taxes, deprecation and amortisation (Ebitda) of $67-million, which was 72% higher than that estimated in the original BFS, while the projected net present value increased by 80% to $310-million and the internal rate of return was estimated at 42%.

The Poplar Grove mine is expected to have a mine life of some 25 years.

“The successful completion of the enhanced BFS for Poplar Grove has exceeded all expectations and validates our decision to develop this high-return mine first and then follow with the development of the Cypress mine,” said Paringa CEO Todd Hannigan.

“I believe it represents a compelling investment opportunity that will reward Paringa shareholders with strong, consistent cash flow over the expected 25-year mine life.”

Following the development of the Poplar Grove mine, Paringa will move to bring its 2.8-million-tonne-a-year Cypress mine into production, taking the company’s total production to 6.6-million tonnes a year to deliver a combined average yearly Ebitda of $163-million.

The company on Tuesday said it would now finalise negotiations with financiers for a competitive financing package to fund the Poplar Grove mine, starting in mid-2017, with first coal expected in mid-2018.