The Quinsam Mine is an underground thermal coal mine with annual production up to 520,000 clean tonnes. Wholly owned by Hillsborough Resources, the mine is located 27 kilometres southwest of Campbell River, British Columbia, Canada. The mine started as an open pit operation in 1987, with underground production commencing in 1990. Since 1994, 100% of coal mined has been from underground workings.

Quinsam produces high volatile low sulphur bituminous coal with a calorific value of 6,600 Kcal/kg (11,900 Btu/lb) on an air dried basis and 6,200 Kcal/kg (11,200 Btu/lb) on an as received basis. The coal is relatively hard which corresponds to lower fines and good handling characteristics.

MAJOR CUSTOMERS

The Quinsam Mine primarily serves international power utility companies and the cement industry in Vancouver and the Pacific northwest. Export shipments are made via an off-take agreement with Vitol SA, of Geneva, Switzerland, part of the Vitol Group, a major energy and commodity trading conglomerate which owns approximately 20.8% of the outstanding common shares of Hillsborough resources Limited. This is a key strategic relationship which reduces the risks associated with the export coal market.

TRANSPORTATION

Quinsam coal is shipped out of the Middlepoint Barge Loading Facility. This modern and efficient facility is owned and operated by Hillsborough Resources. It has a storage capacity of 15,000 tonnes and a loading rate of 2,000 tonnes per hour. The truck haul from Quinsam is approximately 32km. International shipments are shipped from the Texada Island Loading Facility.

Quinsam Mine and Shipping Facilities


Middlepoint Storage and Barge Loading Facility

RESERVES & RESOURCES

At December 31, 2008 the Quinsam Mine has 22.1 million tonnes proven and probable in-situ reserves and 5.8 million tonnes of measured and indicated resources. Adjacent to the current Quinsam Mine, Hillsborough holds additional coal properties in the Quinsam North area, which has measured and indicated resources of 23.8 million tonnes and inferred resources of 1.5 million tonnes. At December 31, 2008, combined NI 43-101 compliant in-situ reserves and measured/indicated/inferred resources from the Quinsam Mine and Quinsam North totaled 53.2 million tonnes. The Quinsam North coal deposit remains open to extension, and 2009 drilling is aimed at extending the known deposit to the north.

National Instrument 43-101 reports on the Quinsam Mine and Quinsam North have been filed on SEDAR and are available for viewing at www.sedar.com.

In order to extend the life of the Quinsam Mine, development plans for Quinsam North are underway, with development currently planned for 2012 to 2014.

QUINSAM MINE FACTS

Coal Type: Thermal Coal, also known as steam coal, is part of the bituminous coal group and is used primarily for power generation, cement manufacture and industrial uses. Remaining resources at the Quinsam mine are estimated to have a sulphur content of less than 1%.

Reserves and Resources: At December 31, 2008, combined NI 43-101 compliant in-situ reserves and measured/indicated/inferred resources from the Quinsam Mine and Quinsam North totaled 64.9 million tonnes.

Number of Employees: 91 excluding contractors. The mine credits much of its safety and operational success to the high caliber its employees. Please visit Hillsborough Resources Safety, Community and Environment sections for more information on each of these areas.

Mining Method: A fully mechanized retreat room and pillar underground mining operation that uses remote-controlled continuous miners.

Wash plant: Capacity of 250 raw tonnes per hour; processes run of mine coal to clean saleable product.

COAL BED METHANE (CH4)

Exploration drilling at Quinsam mine

Overview: Methane (CH4) is a gas formed as part of the process of coal formation. Coal Bed Methane (“CBM”) is methane trapped within coal seams that have not been mined or from mined-out areas (gobs) of coal mines. It can be extracted by drilling into, and mechanically fracturing un-worked coal seams. While the CBM is utilized, the coal itself remains un-mined.

Strategy: CBM extraction is a growing trend in North America and Hillsborough Resources secured title to CBM in 2004 by reaching an agreement with the Government of British Columbia to acquire the natural gas rights for a royalty. The target methane gas fields lie in close proximity to an existing gas pipe.

Hillsborough is working with an operating partner to prepare an exploration and development strategy. The goal is to establish the potential for a commercial gas production from these properties on Vancouver Island, BC.

GH FUELS LIMITED

Quinsam coal is also sold to local niche markets such as pulp and paper plants and greenhouse operators through GH Fuels Limited, a wholly-owned subsidiary of Hillsborough Resources Limited. GH Fuels was formed to target the growing market in converting gas greenhouse burners to coal operations. GH Fuels is the distribution company responsible for break-bulk shipments of Quinsam coal.

Coal type: The greenhouse coal is a screened two inch stoker product with a calorific value on a Gross (as received) basis of 11,851 BTU/lb. The coal is low in sulphur and has a minimum amount of fines due to the screening process.
Customers: Our customers are typically greenhouse operators and owners of commercial buildings that require a lower cost alternative for heating. We also supply the hobbyist, blacksmith and homeowner who want to burn coal in their fireplaces.

Case study: The first shipment of coal to a greenhouse operator was in July 2001. Ivor, a former head of the BC Hothouse Association, was GH Fuels’ first customer. Ivor and Pat Rage, located in Port Alberni, BC burn Quinsam stoker coal, providing cheap, efficient heat for their crops of cucumbers.

Max Grober, Fiesta Greenhouse

Max and Karen Grober own and operate a highly successful greenhouse near Campbell River, BC, where they grow high quality red, green, orange and yellow peppers. Like most greenhouses, the Grobers used natural gas to fuel the water heaters which keep the greenhouse at a steady 23 degrees Celsius. The substantial spike in natural gas prices in 2001 resulted in the Grobers switching to coal and they have never looked back.

Sales: For more information on GH Fuels Limited or if you are interested in purchasing stoker coal, please contact Sharon Korol at 250.923.3989 or info@hillsboroughresources.com.