Brinco plans to double Quinsam’s coal output

Although coal may not attract the same attention from investors or prompt claim staking disputes, at US$40 per tonne on world markets, it is no less valuable than many open pit precious metal ores. Estimates at the Quinsam mine stand at 23.3 million tonnes of surface minable coal which would be mined from a number of pits, as well as 19.9 million tonnes of underground coal reserves.

The Quinsam mine, some 30 km west of Campbell River, B.C., is owned by Brinco Coal, a unit of Consolidated Brinco (TSE). If all goes according to plan, the company will see a more than doubling of its current level of production.

Currently Brinco is mining thermal coal from its Pit 2N at a rate of about 250,000 tonnes per year. The mine has been in commercial operation since April, 1989, producing 198,000 tonnes last year. By 1991, the company expects to expand production to 500,000 tonnes per year.

The key to the company’s expansion plan is the development of underground mining of the No. 1 seam presently being mined in the 2N pit. The 3-metre thick seam dips at about 6 degrees into a hillside and is exposed by the pit over about 1.5 km.

With about 2.2 million tonnes remaining in the 2N, the current pit will extend into the hillside until the strip ratio reaches about 8-to-1.

Underground mining is presently in a test phase to determine if it will be economically viable.

Underground development consists of three parallel adits on 35-metre centers driven on seam from the pit high-wall at the south end of the pit where open mining is complete. The main coal conveyer runs up the middle adit while the south adit houses the ventilation fan and the north adit is used for materials access.

All development drifts are driven by a continuous miner machine on two passes to form a 12×2-metre opening. The miner uses two 15-cm-thick dirt bands on the top of the seam as a guide for the roof level.

Mining uses what is termed a 5-entry system. Five drifts are driven on 12-metre centers perpendicular to the entries. The drifts are then joined to form a number of panels measuring about 60×12 metres.

Once the panels have been blocked out, mining begins at the the far end with the continuous miner removing half the panel on either side of the drift creating what could best be described as a herring- bone pattern as the machine retreats.

Tom Robson, mine manager, noted that as the continuous miner retreats, the operator must leave a few “stumps” of coal to act as pillars. These pillars act as supports to ensure that the back does not cave too quickly but at the same time must allow it to give way to caving eventually. He pointed out that determining the size and number of these pillars is more of an art than a science.

The rate of retreat is also somewhat tricky. Robson noted that only half the panel, or about 30 metres, is taken at a time. If too large a cavity is left prior to caving, the stresses transferred to the walls of nearby drifts can wreak havoc with the floors causing excessive buckling.

During the panel mining operation, the continuous miner leaves the dirt bands above the seam in an attempt to keep ash content to a minimum.

Coal is transferred from the continuous miner to a temporary conveyer, and on to the main conveyer to surface where it is stockpiled prior to being trucked a short distance to the crushing plant.

Because the ash content of the underground coal tends to be higher than that of open pit due to dilution from the roof, the coal is blended at the crushing plant.

The 200-tonne-per-day plant sizes the coal to about -2 inches, the final specifications being less than 15% ash, less than 1% sulphur, a moisture content of about 8.5%, and a calorific value of about 6,500 kcal/kg.

Brinco is planning to complete a coal wash plant on the property by year-end.

Tom Milner, president of Brinco Coal, noted that all the engineering on the plant is complete and the company is in the process of acquiring equipment. The 160-tonne-per- day plant is expected to cost about $1 million and should bring the ash content down to about 12.5%.

Milner is optimistic that the underground operation will prove viable and indicated that costs are below those expected in the feasibility.

Although he declined to quote any mining costs, he did say that transport costs to tidewater are about $10 per tonne with total “freight on board” costs adding a further $3 per tonne. These prices give the mine a distinct advantage to other western producers which have equivalent costs of about $25 per tonne.

Transportation involves hauling the coal by 25-tonne highway truck the 31 km to tide water at the Middle Point barge facility. The coal is then barged to a ship at anchor and transferred using the ship’s gear.

By 1993, Brinco hopes to be producing 750,000 tonnes of coal per year from Quinsam. To facilitate this, the company plans to load ships at the Texada Island ship loading facility owned by Ideal Cement. The coal will be barged the 65 km to Texada terminal which can accommodate 60,000 tonne Panamax ships.

Milner indicated that the upgrading of the Texada terminal is almost complete and that the company has about 30,000 tonnes of coal stockpiled at the facility.

Further expansion of the Quinsam operations will be possible when Ports and Harbours Canada goes ahead with a plan to expand the Middle Point terminal to berth ships by 1995. This would allow Brinco to produce at 1.24 million tonnes per year.

Milner notes that Brinco does not have any difficulty selling its production since customers, primarily Asian generating plants, are eager to diversify their supply. Most of the world thermal coal market is supplied by one group: the Australian producers.

World coal prices are essentially set by the Australians and currently sit at about US$40 per tonne based on a calorific value of about 6,700 kcal/kg.

Milner sees prices moving up over the next five years to over US$45 per tonne as demand escalates as a result of new power plants in Asia.

The company’s staged increase in production will allow it to take advantage of any coal price increases while keeping capital outlays to a minimum. Milner notes that company will finance its expansion from internally generated cash flow.

Despite 1989 being the mine’s startup year, Consolidated Brinco’s 1989 annual report indicates that the coal mine produced an operating profit of about $1.1 million before depreciation and corporate costs.

Consolidated Brinco’s major shareholder is Western Canadian Mining (VSE) which owns about 40% of the company. This is an increase of 7.3% over the level at Dec. 31, 1989; the result of subsequent purchases on the open market. Brinco, in turn owns 31.9% of Western Canadian Mining, giving it a pro rata interest in its own shares of 12.8%.

Brinco also owns an 82% equity interest in oil and gas producer Dorset Explorations (TSE).

As at March 31, Consolidated Brinco had working capital of about $4.4 million, government bonds valued at $3.3 million and long- term debt of $11.49 million. Much of the long-term debt is non- recourse; $8 to Dorset and $3.6 million to the wholly owned coal subsidiary. Consolidated Brinco has about 7.5 million shares outstanding and recently traded close to its 52-week low of $4 per share.