Grande Cache inks supply deal (December 16, 2004)

Shares in Grande Cache Coal (GCE-T) were 70, or nearly 5%, higher at $15.10 in afternoon trading in Toronto on Dec. 16, after the company nailed down a deal to sell more than two-thirds of its hard coking coal production in 2005.

Under the deal, Korean steelmaker Posco and a group of Japanese steel industry customers will buy around 1.3 million tonnes of the coal at US$125 per tonne. The agreement covers the year beginning Apr. 1, 2005.

“This pricing is in line with recent term contract settlements made by major producers in our industry and reflects the continued tight market conditions for hard coking coal," said Grande Cache’s CEO Robert Stan.

Talks with other steel mills continue.

Late last month, the company shipped its first 35,000-tonne batch of high-quality metallurgical coal from its Grande Cache property to Japan’s JFE Steel via the Westshore terminals, near Vancouver.

The Grande Cache No. 12S B2 surface mine is situated in the Smoky River coalfield of west-central Alberta. The mine, which was operated between 1998 and 2000, resumed production in August; sales started up in October. The operation has a lifespan of 4 years.

More recently, the company cranked up its No. 7 underground mine, which produced its first pre-development ore in late November. Construction continues, and production is slated to ramp up to 100,000 tonnes per month early next year.

In all, Grande Cache holds some 150 sq. km in the area, with both underground and surface mining operations. In all, the company expects to spit out some 24.7 million tonnes of saleable coal over twelve years. Exploration aimed at adding reserves is ongoing.

At last count, the company’s surface mines (nos. 8, 12 and 16) were home to 19.5 million tonnes of saleable reserves (10.4 tonnes at the No. 16 East mine); the No. 7-4 underground mine contains 5.2 tonnes.

A drilling program aimed at meeting permitting requirements is underway in the No. 8 mine area. The company intends to file final applications for the area next spring, with approval expected within a year.