2 Business Overview
EastCoal Inc. is quoted on the TSX Venture Exchange ("TSX-V" or the "Exchange") and traded on AIM under the symbol "ECX". The Company has one major asset, the Verticalnaya Mining Complex ("Verticalnaya") in South Eastern Ukraine. Verticalnaya comprises two operations; the existing H8 Deep Mine ("Verticalnaya Mine") and the Verticalnaya North Project ("VNP"), a newly developed incline mine just north of the Verticalnaya Mine. In October 2010, following a period of planning, permitting, and detailed improvements, the Company commenced construction of the VNP as a source of early coal production. To date, 2.7 kilometers of drift development has been completed at VNP. These drifts access the shallower H11 and H11B coal seams.
Production from VNP commenced in July, 2013. Target production from the both the Verticalnaya Mine and the VNP is circa 2.5 million tonnes per annum ("Mtpa") in aggregate of high quality anthracite for domestic and export markets.
In 2011, the Company, after commencing to de-water the lower levels of the Verticalnaya Mine, began rehabilitating previously flooded roadways. The roadways are generally in good condition, requiring only minor repair in some sections. As the water level is lowered, the Company will re-establish a ventilation circuit and repair the current conveyor route that will eventually transport coal by high-speed conveyor from the deep H8 seam to surface.
From the outset, the Company has required the introduction and maintenance of safety procedures in line with best global industry practice. International safety consultants have visited Ukraine operations and their recommendations have been and are being implemented. Safety standards are being received favorably by the workforce. Verticalnaya Mine and VNP are categorized as non-gassy, with low explosive risk.
As previously disclosed, on May 22, 2013 the Board resolved to place Inter-Invest LLC ("Inter-Invest"), the wholly owned subsidiary that owns the Menzhinsky operations into liquidation. The insolvency application process is ongoing and it is expected that Inter-Invest will formally enter liquidation in September 2013.
2.1 The vision
The Company's vision is to become a leading producer of high quality coal in Ukraine.
The Company, deploying a strong and experienced team to develop value from Verticalnaya, is the leader of western investment into the Donbass coal basin - an area which has been identified as having tremendous potential.
Verticalnaya comprises two operations, the Verticalnaya Mine accessing the lower level H8 seam and VNP, an incline mine in development accessing the upper level H11 and H11B seams.
At VNP, the Company has completed the portals and in excess of 2,700 meters of drift and roadway development and commenced the drivage of the two surface drifts to access the H11 and H11B seams where first coal production commenced in July 2013.
The Company is in the process of preparing an updated technical report in compliance with the requirements of National Instrument 43-101 ("NI43-101") for its Verticalnaya property (the "Updated Report"). This report will be made available on SEDAR at www.sedar.com and the Company's website at www.eastcoal.ca in due course.
The Company filed the "Amended Pre-Feasibility Study Report on the Verticalnaya Mine, Ukraine" by IMC Group Consulting Ltd. ("IMC"), dated June 2012 (the "Previous Report") on July 9, 2012. As part of the Company's admission to trading on the AIM market of the London Stock Exchange plc and in accordance with the AIM rules, the Company filed a Competent Persons Report (the "CPR"). The CPR discloses a 26% increase (from the Previous Report) in JORC-compliant total resources (inclusive of reserves), and an amended economic analysis, with a downgrade of some reserves from proved to probable class. The financial evaluation included inter alia a lower assumed sales price for coal, resulting in a reduction in net present value.
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