Western Coal reopens Willow Creek

Vancouver – Western Coal (WTN-T) has reopened the Willow Creek coal mine with significantly better reserves as part of an overall strategy of increasing production by 75% in the next fiscal year.

The open pit mine, located roughly 45 km west of Chetwynd in northern British Columbia, now hosts 29.6 million reserve tonnes of coal after the company achieved an 88% increase in proven and probable reserves. The new reserve is expected to produce up to 7 million tonnes of coking coal and 14.6 million tonnes of pulverized coal injection coal.

The mine is currently permitted to produce up to 900,000 tonnes of metallurgical coal per year, but the company has applied to increase that to 1.7 million tonnes a year by late 2011. Combining the increased reserves and potential increase in production puts the mine life at 13 years.

Along with the planned expansion of production at Willow Creek, the company plans to also increase the capacity of the processing plant and rail load-out facility to 3.7 million tonnes of coal a year. With the expanded capacity Western would not have to build separate facilities for its nearby Brule coal mine that hosts 20.8 million reserve tonnes.

In the fall the company announced an ambitious plan to increase its total production to 10 million tonnes of coal per year by 2013. For the fiscal 2011 year, which started in April, the company plans to spend $300 million to fulfill its goal of a 75% production increase to 6 million tonnes for the year.

The company reported that the June 4th opening of the mine was two months ahead of schedule, but the mine was originally slated to open in late 2008. Western Coal announced in November 2008 that despite a successful start-up, the company would suspend operations and spending at Willow Creek because the recession was affecting coal demand.

The company acquired the mine in early 2008 after buying Falls Mountain Coal, then a recently-acquired subsidiary of Cambrian Mining, which itself was absorbed into Western Coal through a scheme of arrangement in mid-2009. In the Cambrian deal Western Coal, then called Western Canadian Coal, issued 88.6 million shares to Cambrian shareholders.

The Willow Creek mine was originally opened by Pine Valley Mining in late 2004, but closed two years later after the company went bankrupt following unexpected challenges at the mine. The company encountered three times more oxidized coal than expected, which is far less economic and which the company ended up treating mostly as waste material. The washing facility at the mine also had problems, with unexpectedly fine coal not being recovered, which led to yields of 50 – 60% compared to the 75% expected.

In March Western Coal was included in the S&P/TSX Composite Index. The company’s share price was also recently boosted in part by higher coal prices and demand, hitting a 52-week high of $6.97 in April.  The share price, however, has since fallen, including a 70¢ drop on 14 million shares traded following the latest news to close at $4.38. The company has a 52-week low of $1.44 and 326 million shares outstanding.