Coal without the infrastructure headache

ONE Aussie coal junior has got its hands on a 467 million tonne resource which it plans to quickly expand this year before developing. The best thing about the project? It comes without the heartache of maxed out rail lines and ports, or conversely, a complete lack of infrastructure.
Coal without the infrastructure headache Coal without the infrastructure headache Coal without the infrastructure headache Coal without the infrastructure headache Coal without the infrastructure headache

Coalspur's Hinton coal project.

Angie Tomlinson

The reason for the dream infrastructure is the project’s location – Canada. Coalspur’s Hinton thermal coal project is right on the Canadian National rail line which boasts spare capacity of 7-8 million tonnes per annum and leads to export terminals Ridley on the west coast and, further south, Westshore in Vancouver.

The mine will be set up to export to Asian coal markets, including Australia’s traditional hunting grounds of Japan and South Korea, and will compete with thermal coal exports out of Newcastle.

Executive director Taso Arima told International Longwall News Coalspur’s product would be more than competitive.

The Ridley terminal lies 7300km from South Korea and is 6300km from Japan. Newcastle Port lies 8000km from Japan.

Over the past 15 years shipping prices for Panamax coal cargoes from Newcastle to Japan and from Canada to Japan have cycled within 5% of each other. Consequently, Coalspur expects coal loaded free-on-board will be typically on par with FOB Australian prices (energy adjusted).

Coalspur was able to pick up the Hinton tenements in 2008 with some bargaining power thanks to the global financial crisis. At the end of 2008 the directors used Xenolith Resources as a shell and raised $A1.8 million capital to begin exploration to bring the project to JORC status.

Last year the company published JORC-compliant resources of 298.4Mt measured, 123.2Mt indicated and 45.7Mt inferred resources. Exploration so far has shown six-degree dipping seams at 2-8m thick.

The Hinton project is surrounded by established coal mines which export more than 8Mtpa.

This year Coalspur plans to complete scoping, prefeasibility and baseline studies. The company will also carry out public consultation this year and expects a permit by the end of 2011. First coal is expected in 2013.

Coalspur has picked up further leases southwest of Hinton, giving the company 24,000ha of coal-bearing leases. Further geological modelling of the area is expected this quarter.

Arima said getting the operation off the ground was similar to Australia or other first world countries.

Infrastructure-wise, the biggest expense will be conveyors. Coalspur plans to build 10km of conveyors – 3.5km from the plant to the rail load-out, and another from the stockpile to the plant.

A preparation plant must also be built as the coal will require washing.

Later down the track Coalspur will consider a dragline as Coal Valley is traditional dragline country; however, due to low strip ratios, it plans to start off as a truck and shovel operation.

Coalspur has made the effort to get people onboard with experience on the ground. Managing director Gene Wusaty has worked in the area and lived in the nearby town and is well known to locals, as well as the Canadian coal industry.

Wusaty’s reputation and familiarity will come in handy with Coalspur’s plans to dual list on the Toronto Stock Exchange this year.

He was most recently chief operating officer of South Gobi Energy and president of Ivanhoe Mines’ coal division. He has also worked at Canadian outfits Grande Cache Coal, where he was COO, and Fording Coal (now Teck Coal) as general manager.

Wusaty is joined by Canadian locals Denis Lehoux, as vice-president of operations, and Dermot Lane, as development vice-president. Both have 25-plus years of working in the Canadian coal industry.

Coalspur is amenable to bringing in a trading partner, but for now it is concentrating on setting the development up.

“We wanted to get all our ducks in a line and not go too early. If we have a delineated resource, a scoping study, then this represents more value for our shareholders,” Arima said.

Last year Coalspur’s shares rose 1000% to 33c by the end of the year. It continues to trade around that mark.

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