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Coal is the second most important resource exported from British Columbia next to wood products. But ask someone in the province how well the forestry industry is doing and you’re likely to be faced with an icy stare. Coal is big business as the worldwide demand for coal grows and shows no sign of slowing, particularly in rapidly industrializing and developing economies. Asia in particular is hungry for B.C.’s hard coking coal, used in steelmaking, and almost four years of a soft economy have not slowed the demand.
This demand has led to greater interest in British Columbia’s resources from international corporations, including the diversified mining giant, Xstrata Coal, which is located in Switzerland, and JX Nippon Oil & Gas (JX), based in Japan. Xstrata and JX recently announced a joint venture to acquire metallurgical coal properties in the Peace River region of northern Alberta. Xstrata Coal British Columbia will retain the significant share of the venture at 75% with JX purchasing a 25% for $435 million.
Xstrata and JX will be focusing their exploration and development efforts on three main deposits in the Peace River coalfields. The 3,800-ha Lossan coal deposit has an estimated resource of 240 million tonnes that was acquired from Cline Mining in 2011. The Sukunka coal deposit, acquired from Calgary-based Talisman Energy in March 2012, is contiguous with the Lossan property, and has an estimated resource of 236 million tonnes. Finally, Xstrata also acquired First Coal Corporation’s assets, which represented over 100,000 ha of contiguous coal licenses and applications.
Yasushi Kimura, the president of JX, said in a recent news release that the joint venture offers the company the opportunity to become part of the global coking coal market.
“Our existing coal business focuses on the supply of thermal coal to utility companies, and this joint venture enables a full scale expansion of our business into hard coking coal, which is essential for steel manufacturing,” said Kimura. “Xstrata Coal has a strong track record of developing projects and extracting maximum value from coal assets, which will prove invaluable as we build a significant new business that will contribute to the long term stable supply of hard coking coal.”
This is also part of an effort in Japan to find alternate sources of coking coal. Historically, Japan has relied on Australia for the resource, but the devastating floods in Queensland last year had an impact on coal exports from that country.
“Our consolidation of the First Coal, Lossan and Sukunka assets since August 2011 will enable Xstrata Coal to increase our exposure to metallurgical coal further,” said Peter Freyberg, Xstrata Coal chief executive. “There are meaningful synergies between these assets, creating the opportunity to develop a substantial and efficient complex of mining assets, unlocking significant value for our shareholders and other stakeholders in our operations.”
Xstrata and JX expect to produce 9.5 million tonnes of metallurgic coal per year at the peak, and expect to move into full production in 2015.