Gogebic Taconite, LLC October 2014 Corporate Structure
The Cline Group
Foresight Energy Keyrock Energy Gogebic Taconite
The Cline Group is one of the nation’s largest privately-owned mining and natural resource companies
Foresight Energy, Cline’s Illinois Basin coal mining company, is one of the largest coal companies in the United States – Foresight amassed over 3.0 billion tons of high sulfur coal reserves that were “left behind” by big companies after passage of the clean air act – Wide penetration of sulfur emissions controls has lead to widespread competition on delivered costs, not sulfur content – Cline has invested over $1.7 billion in capital to develop mining operations and transportation infrastructure – Most productive underground mining operations in the country, significant long-term domestic and international platform
Keyrock Energy, Cline’s E&P subsidiary, is focused on developing its 225,000 acres of coal-bed, coal mine methane rights and conventional oil and gas – Keyrock looks to acquire long-lived, low-cost vertical well oil & gas plays and focus on cost structure and infill drilling – Exploration & Production companies currently divesting great “conventional” assets to focus on the new paradigm of shale gas
Gogebic Taconite controls one of the largest undeveloped iron ore deposits in the country – Well-understood, but deposit languished in large company reserve portfolio until recently – Aging competitor operations were built in the 60’s and 70’s – Great infrastructure bones from historic mining district – Low strip ratio
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Project Overview
3 Project Overview Type of Deposit: Iron Oxide Current Project: 8M tons per year taconite pellets Mining Process: • Mechanical process using water and magnets • Not a chemical process like sulfide mines Shipping: Rail (CN) to Great Lakes port Project Life: 35 years in anticipated permit area GTac Project Location
GTac is in the Gogebic Iron Range Historic mining of natural ores focused along the eastern edge of the range in Michigan and into Wisconsin The western portion of the range was principally taconite resources controlled by US Steel, Inland and Hanna Actively studied in the 1960s as the natural ore mines depleted Well understood geologically Legacy engineering work in process of being updated for today’s modern mining, milling and concentrating processes and regulations Controlled resources encompass the vast majority of un-mined iron resources in the range
Program Dates Holes (no) Footage Early Congdon 1918-1925 65 23,644 Congdon - USS 1931 12 6,367 US Steel 1954-1962 99 55,924 Jackson Co (Inland) 1964-1968 44 16,512 Hanna 1966-1967 12 5,683 USX 1977 8 5,756 Total 240 113,886
5 Within the focus area is a 1894 era mine named the Tyler Forks Mine. Remnants of the mine exist today including 18,000 tons of hematite ore which was never shipped. Mining Legacy – Tyler Forks
View of the Tyler Fork River from Tyler Forks Mine during the early 1900’s. The land was allowed to reclaim itself.
8 Mining Legacy Continued – GTac Future Mine
9 Gogebic Iron Range Geology
10 11 12 13 14 15 Economic Impact
Study Area Comparison: • Median annual earnings is $24,328 vs. $28,641 for Wisconsin and $29,050 for U.S. • Business Growth in last 10 years has been 0.4% vs. 3.9% for the state and 9.5% for the country.
Recipients of the Economic Contribution • Food Services and Drinking Places – 76 jobs •Transportation/Trucking – 73 jobs •Architectural/Engineering – 40 jobs •Monetary Establishments – 36 jobs •Wholesale Trade – 24 jobs •Private Hospitals – 23 jobs •Retail Stores – 23 jobs Economic Impact Construction Economic Impact: • 2,000 estimated construction jobs • $2 Billion Total Economic Impact (2 Year Total) Annual Economic Impact • 700 direct mining jobs with an annual average salary estimated at $58,000 plus approximately $22,000 in benefits • 2,834 total jobs created (3:1 multiplier) • $604 million total annual economic benefit
Permitting Process
18 Permitting Requirements – Key Points 2010 Wisconsin Metallic Mining Law Requirements Discourages data collection prior to public hearing process DNR did not have prescribed timeframes to process a permit application Unlimited DNR reimbursements and duplication of data at applicant's expense $7 per ton tipping fee on all mining waste deposited in a solid waste storage area Irrevocable Trust Fund funded by applicant, spent at DNR's discretion Administrative Law Judge hearing for approval process Metallic mining moratorium on sulfide bearing rocks Prohibition on IMPACTING any wetland
19 Permitting Requirements – Key Points 2013 Ferrous Mining Summary Ferrous Mining was placed in a separate chapter of the law. Metallic Mining regulations remained in place with no changes
All applications processed concurrently, all hearings held concurrently
Contested case hearings held on specific topics of the permit approval
DNR given processing or decision making timeframes
Maintains all water quality standards
Maintains all air quality standards
Maintains existing Net Proceeds Tax Structure
Mandates compliance with the Great Lakes Compact
20 Permitting Requirements – Key Points Unique Wisconsin Requirements Groundwater Design Management Zone required within 1200 feet of mine site
Waste Characteristic requirements including static, kinetic and microscopic testing
Local Impact Agreements with Counties and Municipalities
$225,000 Local Impact Funding during permitting process
Removing lands from the Managed Forestland Program, pay back taxes
Construction Fee to Counties and Municipalities ($200,000) each
DNR funding capped at $2,000,000 plus unlimited EIS reimbursements
Trout Streams are Areas of Special Natural Resource Interests that must be avoided
12 month pre-application period before a company can file
420 day permit review period of the EIR by the WDNR
Maintain Wisconsin’s Air Quality (NR404), Surface Water Quality (NR102), Drinking Water Quality (NR809) and Ground Quality Standards
A company must comply with the Federal Clean Water and Clean Air Acts’ requirements.
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Progress of the Project to-date
22 Ore outcrop areas were located during the spring and summer months of 2013. Once frozen conditions insured environmentally safe access, the material was excavated. This site produced 800 tons of material which were hauled to a laboratory in preparation for performing bench scale testing. The ore was transported from the hillside to a staging area in preparation for highway shipments. From the staging area, the ore was transferred to trucks rated for highway haulage. The ore within the selected sites were sampled and logged. The sites were mapped and observations recorded. The sites were shaped, contoured and landscaped. Topsoil was re- spread. Seeding and mulch were applied to reduce erosion when the spring rains arrive. The sites are in the early stages of growth with native grasses and plants quickly taking over the previously disturbed areas. In addition to the “bulk sampling”, core drilling was performed. The frozen roads provided environmentally safe access. No new roads were constructed. The winter campaign consisted of 14 drill sites. The frozen road conditions allowed access across existing and potentially wet logging roads. Drilling Overview
• Previous drilling of the area: 20,619 feet drilled, 19,407 feet assayed, 14,240 feet useable for modeling. • GTac’s summer 2013 campaign: 8 holes, 5,130 feet. • GTac’s winter 2014 campaign: 14 holes, 10,930 feet. • Cores, after being logged, are split and quartered in preparation for laboratory analysis. • Water monitoring wells were also drilled during the winter months. Five holes were installed prior to warmer conditions. Water Well Rig Unlike coring, a down-the- hammer was used and the chips collected and disposed of at authorized off- site locations. To reduce the environmental footprint, sites and existing roads were coordinated to fit together. Logging road on the right, water well head casing at the center left and reclaimed bulk sample site on the far left. Contouring at some of the sites included creating depressions to collect sediments thus preventing them from entering the natural water ways prior to complete re- vegetation. Off-Site (Winter) Progress
• Creation of a hydrologic modeling was begun with the initial input of historic records. • Plans and details were developed to begin wetland delineation the summer of 2014. • Teams were organized for the wildlife and fauna cataloging of the project site. • Notice of Intent and various work plans were submitted to the State of Wisconsin. On-Site (Summer) Progress • Streams and wetlands were delineated by environmental consulting companies. • Plant/animal cataloging was performed using “trail cameras”, live traps and observations by field personnel. • Archeological surveys and mapping were performed through-out the project site area. • Water samples were collected and existing water wells were calibrated for future data collection.