Western Canadian Coal set to start second mine

Vancouver — Efforts to transform northeastern British Columbia into a major supplier of metallurgical coal to the Korean and Japanese steel industries have taken another step forward with news that Western Canadian Coal (WTN-T, WXJXF-O) is ready to develop a second mine in the region.

After receiving an environmental assessment certificate, the company is hoping to have a mining permit in place to begin shipping coal from its Brule deposit as early as February.

The announcement comes only two weeks after Western officially opened its Wolverine coal mine, an operation that is benefiting from its proximity to a railway that was built by the Japanese steel makers in the early 1980s.

The availability of a nearby railway means that shipments from Wolverine can easily be put into rail cars and sent west to Prince Rupert, B.C., for export to Asian markets.

“Northern coal, in my view, is coming of age,” says Gary Livingstone, CEO of Western, one of a handful companies that are aiming to take advantage of buoyant prices and existing infrastructure to develop coal projects in the Tumbler Ridge area.

The others include NEMI Northern Energy & Mining (NNE.A-T, NNEMF-O), Hillsborough Resources (HLB-T, HLSRF-O) and Anglo Coal Canada, a unit of Anglo American (AAUK-Q), the South African mining conglomerate.

Livingstone says the world is only just waking up to the fact that northeastern B.C. has the ability to deliver coal at costs that will allow it to compete with other coal-producing regions of the world, such as Australia.

According to the Mining Association of British Columbia, Brule is among five coal projects in northeastern B.C. that are working their way through the project review and permitting process.

Meanwhile, Western says its long-term goal is to be producing up to 5 million tonnes of metallurgical coal per year by 2009.

That will include up to 1 million tonnes from Brule, and another 3 million from Wolverine. To reach its production targets, the company is also counting on output from its Saxon properties near Tumbler Ridge, which are part of the Belcourt-Saxon Coal Limited Partnership.

Last week, Western Canadian said it had reached a deal that will permit Western to source additional coal supply from a partnership that is being set up by Anglo Coal Canada, NEMI and Hillsborough to develop coal projects in northeastern B.C.

That includes 800,000 tonnes of coal to be processed at the Wolverine site.

The agreement also provides a mechanism to establish a break fee arising from a previously proposed combination of Western and NEMI to be resolved quickly by an independent expert, rather than the courts.

Livingston said Brule will be inexpensive to develop because the company can use existing infrastructure at the adjacent Dillon mine, which is virtually depleted.

Brule will be a producer of pulverized coal injection (PCI) coal, a commodity designed to reduce the cost of steel production, by replacing up to 30% of coke that is used in steel-making blast furnaces.

Subject to regulatory approval, Western said it has arranged a $17.1-million private placement deal with its major shareholder, Cambrian Mining (CGIIF-O, CBM-L). The placement consists of 8.8 million shares, priced at $1.95 a share. Western closed unchanged on the news at $1.81 in Toronto.