Court ruling upholds coal-royalty agreement

Vancouver – The British Columbia Supreme Court has ruled in favor of International Royalty (IRC-T) and upheld the company’s royalty agreement with Western Canadian Coal (WTN-T) over certain coal properties in northeastern British Columbia.

The parties signed an agreement in February of 2005 whereby International Royalty acquired 20.3% of a 1% royalty on the price of all coal produced from Western’s Wolverine and Brazion coal properties. The purchase price was $1.25 million, with $312,500 payable in cash and the balance arranged through share issuances.

A month later, Western filed a court petition challenging the validity of the agreement, stating the deal had not received “appropriate approvals” and was not in the “best interest” of the company. The court dismissed the petition and upheld the royalty, based on the February 2005 agreement between the parties.

Western has 30 days to appeal the decision, and will review the written reasons for judgment while considering its next step. In the meantime, the company says it will continue to reflect its royalty obligations under the agreement in public disclosure documents.

Western is building a coal preparation plant at Wolverine to handle 3 million tonnes of hard coking coal per year. Initial throughput will begin this summer at a rate of 2.4 million tonnes per year, assuming government approval of its proposal to increase production to this rate from the previously applied-for annual rate of 1.6 million tonnes.

International Royalty holds 60 royalties in 14 commodities, however its most significant asset is an effective 2.7% net smelter return royalty on the Voisey’s Bay nickel-copper-cobalt project in Labrador. The mine began producing concentrates late last year. Total production this year is estimated to be in the order of 29,500 tonnes of copper and 54,400 tonnes of nickel.