Underground Mining at Grande Cache Coal (GCC) is presently ongoing at the No. 7 area and the No. 12 South B2 underground area. GCC commenced production from the No. 7 Underground Operations in November 2004. The underground mining operation utilizes the room-and-pillar mining system to extract No. 4 seam coal from gently inclined limbs (ranging from flat to approximately 16 degrees) of major folds located at a depth uneconomic for surface extraction. This mining method develops roadways into the coal, leaving pillars of coal between the roads. This is referred to as the "development" phase. When the roadways reach the boundary, the pillar of coal between the roads is systematically extracted as operations retreat. This is referred to as the "depillaring" phase. Underground Mining enhances the recovery of the coal resource associated to the property.
The No. 12 South B2 underground operation has an estimated resource base of 11.6 million tonnes and coal production is estimated to commence during the third quarter of fiscal 2012, which begins October 1, 2011. Grande Cache Coal has one additional permit and license application in progress, referred to as No. 12 South A Surface Pit.