likely be closer to five or six million /year

Inside Hinton Parklander/Hinton News
Mine may expand - 230 local jobs expected in 2012
Posted 6 days ago

By Marilyn Gray

The president and CEO of a coal company that recently set up shop in Hinton addressed the local Chamber of Commerce last week, laying out the company's plans for a future mine near Hinton.

Coalspur president and CEO Gene Wusaty told the packed conference room at Rancher's Restaurant that the initial plans for a mine with a life of 14 years producing four million tonnes of thermal coal per year is the company's minimum goal, and plans are underway to expand the scope of the project to last longer and produce more coal.

"Fourteen years isn't really long enough, we'd like to push to 20 years or more," said Wusaty adding that the annual output goal will likely be closer to five or six million tonnes per year.

"Once you build the mine and pay off capital you can afford to mine for much more costly-[to-reach] coal," he said. "So we expect this project will be around for a long time." A company starting a new mine needs to spend about $100 million in startup costs for every million tonnes of annual capacity, he said. As such, the minimum startup spending on the mine will amount to more than $400 million. The main way the company is seeking to do this is by acquiring more of the surrounding coal properties in the area to increase the landmass of the mining operation.

"Thermal coal mines have to be bigger because the prices are about half of what coking coal is," he said. "In order to compete you need to be big. We've been adding a lot of territory to our company," he said. Currently, the company's acquired land amounts to 25,000 hectares.Recently acquired land in the fourth quarter of 2009 include lands that were in the first stages of being developed for coal in the early 1980s when plummeting coal prices forced the cancellation of the projects.

As such, positive feasibility studies were completed by well-known companies Esso and Dentherm, which Wusaty said will give extra credibility to project and encourage potential investors.

In preparation for attracting more investors, the company signed the paperwork to be listed on the Toronto Stock Exchange (TSX) three weeks ago and will be listed on the TSX in October of this year.

Wusaty said he believes that thermal coal is about to experience a resurgence similar to what recently happened to coking coal.

He pointed out that in the fall of 2009 thermal coal prices were at about $67 U.S. and they are now at $95, adding that in China's demand for imported coal jumped from 15 million tonnes in 2008 to 58 million tonnes in 2009.

"You have no idea the amount of construction going on in China," he said. "They're building all these places and they need coal and they need steel . . . they're running out of their own resources and they're importing now."