Wed, October 4, 2017 11:15 am

More from the CAC Conference/Canadian Coal Projects in Development:To follow up on our notes in the Week Ahead flash yesterday, below are additional comments on development projects in Canada that Dianna collected while at the CAC conference. Strong market pricing has encouraged new production capacity, with producers counting on continued stability and growth in Asian coal demand. The projects listed below represent 12 mm MT/year of met, 6.0 mm MT/year of thermal and 1.0 mm MT/yr of anthracite coal (at full production rates) in total, and still there are others that are also expanding and/or starting up production (Teck Resources’ Baldy Ridge, Fording River and Quintette, Jameson’s Crown Mountain, etc).

  • Conuma Coal/Willow Creek: Mark Bartkowksi, President of Conuma Coal, gave an update on their three met properties located in eastern British Columbia (previously owned by Walter Canada), which connect to Ridley terminals via a 600-mile Canadian National (CN) rail corridor. Altogether, their operations expect to produce a little over 3 mm MT this year and grow to 6 mm MT in 2018. Brule, a 2.5 – 3.0 mm MT/yr ULV PCI mine returned to operation in September 2016, followed by their 1.7 mm MT/yr mid vol Wolverine mine in January 2017 (first cargo in April 2017, 4½ months to full ramp up). Their third and only mine still in development is the 1.5 mm MT/yr Willow Creek mine, which is expected to begin production in springtime 2018. The Willow Creek production is a high CSR (+70) mid vol hard coking coal. Initially, Conuma had planned to pad one full year in between the startup of each operation, but brought Wolverine’s schedule forward given the robustness of market prices. Mark gave an incredible, positive and uplifting presentation that chronicled Conuma’s involvement in the community and commitment to a unique company culture that employs a ‘Loss Prevention’ business model, incorporates an ‘Integrity Process Development’ plan, maximizes opportunities, and encourages their employees to ‘pay it forward’. Conuma is an example of successful collaboration in partnerships across their operations, from working with regulators and First Nations in achieving permitting goals, to working with CN to complete necessary repairs on Wolverine’s rail spur two weeks ahead of schedule.
  • Riversdale Resources/Grassy Mountain: Riversdale Resources CFO Anthony Martin presented the 4.5 mm MT/yr Grassy Mountain project in southwest Alberta, acquired in 2013. He described the coal quality as a “vanilla” tier 2 hard coking coal that has good compatibility with Hunter Valley semi-soft products. They expect a strip ratio of 7.2:1 in the first five years of mining the three seams (combined thickness of ~20 meters) and have ~150 mm MT of reserves (expect a +23 year mine life). Anthony said they expect to be exporting through Westshore in 2020.
  • Kameron Collieries/Coalspur: We spoke with Paul Vining, CEO of Kameron Collieries (The Cline Group), who was kind enough to give us an update on their next Canadian coal project (the first being the Donkin mine in Nova Scotia that began producing in Q1 2017). They’re aiming to bring the Coalspur operation, which they purchased for A$15 mm (US$11.8 mm) in 2015, to market in 2019 with expectations to mine approx. 6.0 – 7.0 mm MT/yr of low-cost thermal coal in Alberta. Construction commenced in June this year. He also expressed a positive experience with provincial regulators—a few years ago they developed a more streamlined permitting and regulatory process that provides a ‘one-stop shop’ for producers in development. The 5,750 – 5,800 kcal/kg quality coal will travel 700 miles along CN railway and ship through Ridley Terminals to customers in Asia.
  • Allegiance Coal/Telkwa: Managing Director of ASX-listed Allegiance Coal (AHQ), Mark Gray, impressed us with their semi-soft coking Telkwa project, whose studies have shown a cash cost of only US$55/MT FOB mine, in the lowest 5% of the seaborne met cost curve. The asset, which has total JORC resources of ~150 mm MT, is in western British Columbia, only 360 km by rail from Ridley Terminals. They plan to begin phase 1 in late 2019/2020 with 250K MT/yr of production, then ramp to 1.75 mm MT/yr within four years.
  • Atrum Coal/Groundhog: We also met Max Wang, CEO of ASX-listed Atrum Coal (ATU), who is developing the Groundhog project, an ultra-high-grade anthracite asset in British Columbia with approx. 1.0 billion MT of JORC resources. The Japan Oil, Gas and Minerals National Corporation (JOGMEC) has been a joint venture partner for two years in the exploration of part of this vast coal field – Panorama North area. It also recently signed the agreement to acquire 100% of Elan Coal – a large hard coking coal deposit located near the Crowsnest Pass area of SW Alberta, and is immediately north to the Grassy Mountain coking coal project (see above).