COMPLIANCE ENERGY CORPORATION - POSITIVE FEASIBILITY RESULTS RECEIVED FOR THE RAVEN COAL PROJECT

TSX-V TRADING SYMBOL:  CEC

VANCOUVER, May 9 /CNW/ - Compliance Energy Corporation ("Compliance" or the "Company) is pleased to announce a positive, NI 43-101 compliant, independent Feasibility Study1 ("Feasibility Study") for the Company's 60% owned Raven Underground Coal Project (the "Project") in the Comox Coal Basin on Vancouver Island, British Columbia, Canada.  Pincock, Allen, and Holt ("PAH"), of Denver, Colorado, a qualified independent mining consulting firm, prepared the Feasibility Study on behalf of Compliance and its joint venture partners. This Feasibility Study updates a Preliminary Feasibility Study, also prepared by PAH, that was filed on SEDAR on October 15, 2010.

Project Description

The Project is 80 kilometres (50 miles) northwest of Nanaimo, British Columbia, and approximately 60 kilometres (37 miles) southeast of the currently producing Quinsam Coal Mine and is approximately 2 to 20 km (1 ½ - 13 miles) away from numerous previous producing coal mines near and south of Cumberland, British Columbia.  The Project is attractively situated adjacent to a modern infrastructure corridor that includes a four-lane divided freeway, natural gas pipeline, high-voltage electricity transmission lines, and a railway that connects to an available port facility.

The Project will be included within an area of approximately 3,100 hectares (7,600 acres), 2,958 hectares of freehold coal rights and 142 hectares of government coal licenses. The coal is classified as high volatile A Bituminous semi-soft metallurgical coal but could also be sold as a high energy content thermal coal product.

Summary of Financial Results

The Project involves underground mining utilizing room and pillar mining methods with conveyor transportation to surface. An annual average of 1.93 million tonnes of raw coal will be processed on site, resulting in total average annual production of 0.85 million tonnes of saleable semi soft metallurgical and thermal middlings coal per year over a 15.5 year mining term. Processed coal production will range from 0.65 million tonnes to 1.1 million tonnes per year after the initial start up period and excluding the final year of mining. Processed coal will be transported to Port Alberni on the west coast of Vancouver Island and marketed into Asian coal markets, likely Japan and Korea. Infrastructure construction is anticipated to commence in 2012 subsequent to the receipt of all necessary permits. Mine construction and development would take approximately one year to complete and the first shipment of coal is projected to commence in late 2013.

John Tapics, President and CEO of Compliance Energy, stated that "this Feasibility Study is a significant step forward for the Company. It confirms the long term financial viability of the Raven project which is achievable with responsible environmental and social considerations.  We are pleased with the plan developed in the Feasibility Study by PAH and other contributors and look forward to our next phase of progressing forward through the coordinated Provincial-Federal environmental approval processes."

The Feasibility Study concludes that the Project (100% basis) is financially attractive with an estimated pre-tax NPV (8% discount rate) of CDN$378 million at an average realized coal price of CDN$174 per tonne (prices are FOB Port Alberni). The Project returns a non-levered, pre-tax discounted cash flow-internal rate of return of 28.7%.

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1 The Company and its consultants are continuing to advance the study work in order to advance the Feasibility Study.  Two areas remain to be fully addressed, which include the quantity and quality of water inflows to the mine workings; and there are also ongoing studies to determine if there is any potential for the rock reject material to be acid generating.


Table A                
Summary Results (1)(2)                
                 
Project Pre-Tax Net Present Value (CDN$ Millions)(3)                
    5%  Discount rate               $ 539
    8%  Discount rate               $ 378
   10% Discount rate               $ 297
                 
Project Pre-Tax Internal Rate of Return               28.7%
Undiscounted cash flow payback period               Year 5
Average annual Project EBITA(4)(CDN$ Millions)               $ 83

Notes:

(1)      The Feasibility Study was completed on a 100% Project basis and thus all results presented in this news release are shown on a 100% Project basis. The Company holds a 60% interest in the Project.
(2)      These results are presented on a 100% equity financing basis for the capital requirements for the Project.
(3)     Net present values are discounted to 2012, the first year of the Project cash flows.
(4)      Earnings before interest, taxes, and amortization.

Coal Resources and Coal Reserves

The coal resources and coal reserves are reported in accordance with Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Definition Standards for Mineral Resources Mineral Reserves and their Guidelines, and are compliant with National Instrument 43-101 ("NI 43-101").  The resource and reserve estimate was prepared by A. Lorraine Livingston, and Lynn A. Sessions under the supervision of Peter Christensen, of independent mining consultant Pincock, Allen, and Holt, an independent Qualified Person (QP), as this term is defined in NI 43-101.

Based on the resource models developed, PAH has completed the Feasibility Study on the project. Based on the economic analysis conducted as part of the Feasibility study, reserve estimates are summarized in Table B and were derived from a base case in which two products; a semi-soft coking coal ("SSCC") and a thermal coal middling ("Middling") product are produced. The reserves summary includes the ROM tonnes mined (includes dilution), and the product coal produced (includes factors for coal processing yield, and process efficiency). Proven and Probable reserves are estimated at 29.9 million ROM tonnes which after processing is estimated to yield 13.1 million product tonnes:

Table B                                    
Summary of Underground Coal Reserves (kilotonnes)    
            ROM(1)           SSCC
Product
          Middling(2)
Product
          Total
Product
Proven           14,669           5,531           826           6,357
Probable           15,234           5,985           746           6,731
Total(3)           29,903           11,515           1,572           13,088

Notes:

(1)      Run of Mine raw coal prior to processing
(2)      Although metallurgically a SSCC product, the ash content is in excess of 10% and thus this portion of production is classified as a Middling product.
(3)      Totals may not add due to rounding.

Production Summary

The Feasibility Study selects an underground room-and-pillar mining method to provide the maximum flexibility to adapt to the variable conditions present at the Project. The room and pillar method centres on the use of continuous miners, shuttle cars and dual boom roof bolters used for roof support.  Shuttle cars haul coal from continuous miners to the belt-conveyor feeder breakers.  The belt-conveyors feed the raw coal to the surface preparation and process plant.

Raven coal can be processed to a final product specification of 10 percent ash (dry basis) and approximately 1.2 percent sulphur and is suitable for the metallurgical coal market. Alternatively, all of the Raven washed product could be marketed as a high-quality thermal coal with average product specifications of 7,000 kcal/kg and 15 percent ash on a dry basis. Given this, the process plant has been designed with the flexibility to produce metallurgical coal, with a thermal middlings coal by-product or alternatively a high-quality thermal coal. There are markets for metallurgical coal, thermal (or "steam") coal, and industrial coal (higher than 15 per cent ash on a dry basis) available for the Raven Project.  Rock rejects will be directed to a surface storage pile to the north and west of the access portals and processing facilities.

The total project life is approximately 17 years, comprising a 12 month construction phase (2012 to 2013) followed by an 15.5-year mining period with site reclamation in the final year. The initial construction phase involves site preparation, infrastructure construction, and decline development. Major infrastructure to be constructed on site includes a coal processing plant, coal stockpiles and handling equipment, mine offices, equipment workshops and power sub-station.

Coal processing will be conducted on site. Average wash plant yield has been estimated at 44%. The final coal products will average 88% semi-soft metallurgical coal and 12% thermal middlings product over the mine life.

Table C                  
Projected Production                  
                   
Total Raw Coal mined (millions of ROM Mt)                 29.9
Total Saleable Coal (millions of Mt)                 13.1
Mine Life (Production Years)                 15.5
ROM Average Mining Rate (millions of Mt per year)                 1.93
ROM Average Saleable Coal (millions of Mt per year)                 0.85

Notes:

(1)     ROM = Run of Mine

(2)     Mt = Metric Tonnes

A number of options were considered for the transportation of coal from the mine to port. The base case assumes contracted highway trucks are used transport the coal to Port Alberni, British Columbia for loading onto Panamax-class ships for export to Asian Coal markets.  Compared with coal ports in Australia, Port Alberni has an absolute distance advantage to markets in Japan and Korea.

The quantity of recoverable run of mine coal including dilution is estimated at 29.9 million tonnes. The saleable product in the base case is estimated at 11.5 million tonnes of semi-soft metallurgical coal and 1.6 million tonnes of thermal middlings coal. 97.5 million tonnes of Measured and Indicated resources were included to calculate the potential mineable coal reserve. No consideration has been given in the mine plan for the 34.5 million tonnes of inferred resources. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

The Company engaged an independent third-party coal market research firm to produce a coal price forecast for Raven Coal.  The Raven metallurgical coal product has been characterized as essentially similar to Australian New South Wales semi soft coking coal, notwithstanding the fact that some characteristics of Raven coal are more typical of premium Australian hard coking coal. Raven thermal product is forecast to track the price of Australian coal shipped from the port of Newcastle, Australia.

Capital Expenditures

The mine development plan assumes that capital spending begins in 2012, with the majority of capital spending (equipment and facilities) occurring in 2012 and 2013. Thereafter there will be on-going capital expenditures to add additional underground conveyors and sustaining capital has been budgeted to replace worn equipment over the life of the Project.

Table D                  
Capital Expenditures (CDN$ Millions) (1)                  
                   
Initial Capital Costs:                  
   Engineering , tendering,  site development, electrical  switchgear and substation                 $   17.7
   General surface infrastructure (2)                 21.6
   Coal preparation plant                 10.1
   Raw and product coal handling/rejects                 18.3
   Underground mining equipment                 34.6
   Underground conveyors                 31.9
   Ancillary Underground Equipment and power                 6.9
   Underground Development and access                 12.7
   Mine facilities                 153.9
   Port facilities (3)                 59.2
                  213.1
   Contingency                 28.4
   Sub-total Capital (including contingency) (4)                 241.4
Sustaining Capital (Life of Mine)                 50.4
Total Capital Outlay(5)                 $  291.9

Notes:

(1)      Capital expenditures include contingency and are shown in 2011 dollars.
(2)      Includes an estimate for a water treatment of $16.3 million, which will be the subject of further study.
(3)      Includes an estimate for a travelling ship loader. A fixed ship loader at Port Alberni would reduce total capital by approximately $20 million, but this remains subject of further study.
(4)      Approximately $208 million of this amount is for initial capital to steady state production with the balance in later years.
(5)      Totals may not add due to rounding.

Mine operating Costs

The mine operating costs reflect a typical room-and-pillar operation with conveyor transport to surface and coal processing at surface.  On-site costs consist primarily of workforce costs and also include operating supplies, maintenance parts and supplies, electric power, water treatment, roof bolts and all other mining and processing materials. On-site costs are estimated to average CDN$61.02 per Mt of saleable coal. Offsite costs include coal loading and transportation, port costs, corporate general and administration, sales commissions and royalties.  Off-site costs are estimated to average CDN$15.48 per Mt of saleable coal, resulting in a total average operating cost of CDN$76.50 per Mt of saleable coal, FOB Port Alberni.

Job Creation in the Comox Valley

In production, the Project is projected to create approximately 350 well paying local jobs during its 15.5 year life, and at the peak of construction, over 200 jobs, providing a large economic opportunity for communities' residents and Aboriginal Groups.

Economic Enhancement Opportunities

Several opportunities remain at the Raven Project for generating additional revenues and improving economics, as well as for lowering capital and operating costs. These opportunities were considered outside the scope of the work, but may be addressed in subsequent studies. These opportunities include the evaluation of different port options, increasing the quantity of saleable coal through additional in-fill drilling to move inferred resources to measured and or indicated resources and therefore into the mine plan; additional resource drilling, if successful, could either expand the mine size or extend mine life; and revising water treatment capital expenditures with the completion of further scientific study. The Company and its consultants are continuing to evaluate these project opportunities.

Qualified Person

Peter Christensen, A. Lorraine Livingston, and Lynn A. Sessions of independent mining consultant Pincock, Allen, and Holt, are the Qualified Persons as defined by NI 43-101. They have reviewed and approved the results presented in this press release. A copy of the updated NI 43-101 compliant technical report on the Raven Underground Coal Project will be available within 45 days of the issue of this press release at www.sedar.com.

About Compliance Energy Corporation

Compliance Energy Corporation is a mining exploration and development company. Our primary holding is our interest in over 31,000 hectares of coal rights on Vancouver Island, British Columbia, where we are focused on developing the Raven Underground Coal Project of which we hold a 60% interest. The remaining 40% is owned by I-Comox Coal Inc. (a subsidiary of Itochu Corporation of Japan) and by LG International Investments (Canada) Limited (a subsidiary of LG International Corp. of Korea).

The Company also holds a number of mineral exploration properties totaling over 24,000 hectares on Vancouver Island, BC which are 100% owned by the Company, some subject to certain royalty requirements. Our shares trade on the TSX Venture Exchange under the symbol CEC and investor information is available on our web site at www.complianceenergy.com.

On behalf of the Board of

COMPLIANCE ENERGY CORPORATION

John Tapics
Chief Executive Officer

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the Policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

FORWARD LOOKING STATEMENTS

This release contains "forward-looking statements" within the meaning of applicable Canadian securities legislation.  Forward-looking statements include, but are not limited to, statements that address activities, events or developments that the Company expects or anticipates will or may occur in the future, future mineral exploration activities, future business strategy, competitive strengths, goals, expansion, growth of the Company's businesses, operations, plans and with respect to exploration results, the timing and success of exploration activities generally, permitting time lines, government regulation of exploration and mining operations, environmental risks, title disputes or claims, limitations on insurance coverage, timing and possible outcome of any pending litigation and timing and results of future resource estimates or future economic studies.  Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "planning", "planned", "expects" or "looking forward", "does not expect", "continues", "scheduled", "estimates", "forecasts", "intends", "potential", "anticipates", "does not anticipate", or "belief", or describes a "goal", or variation of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved.

Forward-looking statements are based on a number of material factors and assumptions, including the receipt of necessary regulatory approvals, that counterparties to material agreements will duly perform their obligations there under, the results of drilling and exploration activities, that contracted parties provide goods and/or services on the agreed timeframes, that equipment necessary for exploration is available as scheduled and does not incur unforeseen break downs, that no labour shortages or delays are incurred, that plant and equipment function as specified, that no unusual geological or technical problems occur, and that laboratory and other related services are available and perform as contracted.  Forward-looking statements involve known and unknown risks, future events, conditions, uncertainties and other factors which may cause the actual results, performance or achievements to be materially different from any future results, prediction, projection, forecast, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others, the interpretation and actual results of current exploration activities; changes in project parameters as plans continue to be refined; future prices of minerals; possible variations in grade or recovery rates; failure of equipment or processes to operate as anticipated; the failure of contracted parties to perform; labour disputes and other risks of the mining industry; delays in obtaining governmental approvals or financing or in the completion of exploration, as well as those factors disclosed in the company's publicly filed documents. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.

SOURCE Compliance Energy Corporation

For further information:

Contact Jim Defer, CFO or Greg Werbowski, Investor Relations at 604-689-0489 for further information.

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