Horizons for Growth was Hillsborough Resources Limited?s slogan for 2005. After a very busy year, we have seen growth on several fronts and the horizon in northeast British Columbia looks brighter than ever. Thermal and metallurgical coal prices have plateaued but remain strong; feasibility and environmental processes are progressing; and two international friends have joined us in developing projects in the region.
The two well-respected international companies, Anglo Coal, the fourth largest coal producer in the world, and AES Pacific Inc., will assist us with developing the potential of this region and be part of our long-term strategy for Hillsborough?s investment in the northeast.
Hillsborough is already an experienced coal producer, currently operating two underground thermal coal mines. The first is the Quinsam mine near Campbell River, BC, which serves the local and west-coast U.S. cement industry. Our second operating mine is the Crossville mine in Tennessee, which serves the regional power utility and industrial markets.
This year promises continued high levels of activity, and Hillsborough has a vested interest in seeing that the northeast thrives from the benefits of the world coal market. The B.C. government predicts that new coal mines in northeast B.C. could create up to 1,000 new direct jobs and $1 billion in investment by 2010. Overall, the B.C. coal industry contributes over $2 billion in annual production value to the province?s economy.
With the revival of the coal market in 2004, Hillsborough began acquiring additional properties. We completed the acquisition of a large group of properties located in northeast British Columbia near Tumbler Ridge in 2005. The group includes 11 properties eight are coking coal properties, two are coking coal and PCI (pulverized coal injection) properties, and one is a thermal coal property. The primary coking coal property within the portfolio is Five Cabin, located southwest of Tumbler Ridge, and the one thermal coal property is Wapiti, located north of Tumbler Ridge. All of these properties have potential coal resources suited to surface mining. In addition, they have diversified our coal resource base and target markets.
British Columbia is the world?s second largest exporter of metallurgical coal, and B.C.?s known coal resources are estimated at 25 billion tonnes, and much of it is still underdeveloped. We are doing our part in developing these resources. Currently, we are completing a major year-long exploration program on the Horizon mine area, located on the large Five Cabin property (north side). We have drilled in excess of 170 holes totalling over 17,000 m of drilling.
This major exploration program began before Anglo Coal came to the table; we will continue our present work with respect to the Horizon group on developing the mine plan and feasibility study for the Horizon mine. The feasibility study is based on initial production up to 1.6 million tonnes per year of coking coal from both surface and underground operations. We have entered the Environment Assessment process as part of the mine permitting requirements.
After many months of discussion, a joint venture agreement with Anglo Coal, a division of Anglo American plc, was finalized in February 2006. Anglo Coal is an international coal mining company, with interests in operations in South Africa, Australia, Venezuela, and Colombia producing in excess of 90 million tonnes of coal per annum. The Anglo American group of companies is involved in the mining of, among others, gold, platinum, diamonds, iron ore and other industrial minerals.
The Coal Projects Agreement with Anglo Coal covers nine of the eleven properties we hold in the northeast and these properties have been grouped into two project areas ? the Horizon mine group and the Murray River Group (MRG).
he property groups are based on the exploration and development work already completed, or was in the process of finishing, before signing the agreement. Under the MRG Joint Venture, Anglo Coal assumed immediate responsibility for managing the exploration and development of the MRG properties, including Five Cabin Southridge and Reesor. Hillsborough will continue to advance the Horizon mine project to a development decision.
An initial exploration program in Southridge was completed in March, which gives a good indication of the nature of the deposit and provides a good basis for planning the major drilling program to be carried out by Anglo this summer.
Metallurgical coal production from the northeast is expected to go to a variety of customers in the steel industry, particularly the Asian market where steel demand is strong. Coal is an essential ingredient for iron and steel production, approximately 64 percent of steel production worldwide comes from iron made in blast furnaces which use coal. Blast furnaces use iron ore, coke and a small amount of limestone. Coke is made from coking coals, which have certain physical properties that cause them to soften, liquefy and then resolidify into hard and porous lumps when heated in the absence of air.
The horizon shines brightly in the northeast for another reason, power generation. Thermal coal is used primarily as a fuel to produce steam for generating electricity by electric utility companies, but it is also used for industrial processes such as cement manufacturing and pulp and paper plants.
In an effort to develop our Wapiti property as a thermal coal mine, Hillsborough Resources has joined with AES Pacific Inc., under the name AESWapiti Energy Corporation to advance a proposal under BC Hydro?s latest call for power production tenders to develop an energy generation project at the Wapiti property site.
AES Corporation is one of the world?s largest global power companies with operations in 25 countries on five continents; AES?s generation and distribution facilities have the capacity to serve 100 million people worldwide. Their 14 regulated utilities have annual sales of over 82,000 GWh and their 128 generation facilities have the capacity to generate over 44,000 megawatts. To do this, they have a global workforce of 30,000 people who are committed to operational excellence and meeting the world?s growing power needs.
The AESWapiti proposal is for a power generation project, which would include a 165 MW thermal electric power plant and a 35 kilometre, 230 kV transmission line, and would have a contemplated project life of at least 40 years. AESWapiti would be operated by AES Pacific, Inc., and fuel for the facility would be supplied by the Wapiti coal mine operated by Hillsborough Resources.
Hillsborough takes a holistic approach to everything it does including mitigating risks. Risks may include human, environmental, financial and operational. The safety of employees is an important element to the efficiency and productivity of a successful operation. Quinsam employs approximately 85 people and holds one of the best safety records of any mine in Canada. Hillsborough Resources mantra at all of its operations is ?Safety is Job #1.?
The recent Joint Venture with Anglo Coal and the announcement of the AESWapiti proposal are just two examples of Hillsborough?s future in the northeast. Additional Hillsborough 2006 objectives include the ramp-up through the year to planned production at Crossville mine and complete NI 43-101 compliant technical reports on development properties and Quinsam?s expansion drilling program.
We will continue to leverage our strong operating and financial management experience in bringing these projects to fruition, while at the same time maintain growth opportunities through the development of new coal resources and markets. Hillsborough?s leadership, industry expertise and sustainable mining practices are key elements to developing the potential of the northeast coal resources and are the bases for our long-term strategy in northeast British Columbia