Coal news and updates

Cline purchases Canadian mine, will likely export thermal coal: analyst

An affiliate of the US coal producer the Cline Group has purchased Canada's Coalspur Mines at a "bargain price" and could begin exporting thermal coal within two years, an analyst said Wednesday.

Luxembourg-based KC Euroholdings, which is affiliated with the Cline Group, has agreed to pay A$15 million ($11.83 million) for the company, Coalspur said in a statement Tuesday. Coalspur mines includes the 25,000-acre Vista mine and a total of about 136,000 acres of coal leases in western Canada, the analyst said.

Paul Vining, who stepped down as president of Alpha Natural Resources at the end of January, will be KCE's CEO and will develop Vista and other international operations, Coalspur said.

The first phase of the project could produce up to 6 million mt of thermal coal annually, making Vista Canada's third largest mine, said Joe Aldina, senior analyst for New York City-based Wood Mackenzie. The second phase, which could take place by 2022, would bring the capacity up to 12 million mt, and could make the mine Canada's largest, he said.

"It is good news for Coalspur and the Vista project to have somebody that's well-capitalized like Cline to step into the project," Aldina said. "It's a perfect time for somebody like Cline to look for coal assets, not just in the US, but internationally."

The Vista mine, a 25,000-acre open surface mine west of Edmonton, has a marketable reserve of 303.8 million mt of coal and a recoverable coal reserve of 521.4 million mt of coal, according to a technical report issued in July.

KCE is in the process of completing a separate acquisition of the Donkin coal mine in Nova Scotia through a subsidiary, Kameron Collieries, Coalspur said.

Cline owns 86% of Foresight Energy, which produces about 22 million st of thermal coal annually in the Illinois Basin. The coal is consumed domestically and sold to overseas markets, primarily to Europe.

Vista's calorific value will range from 5,550 to 6,000 kcal/kg (GAR) and sulfur value of 0.3%, Aldina said. Vista's thermal coal would be sold to Japan, Taiwan and Korea.

Cline was likely attracted to Canada's stable regulatory environment and easy access to both rail and port terminals, Aldina said. The Vista mine would ship thermal coal via Canadian National railroad west through the Ridley Terminals at Prince Rupert into the Asian markets, he said.

"It's pretty much a turnkey project," Aldina said. "They could develop this pretty quickly."

Cline has its own in-house marketing team that exported more than 7 million mt of thermal coal into Europe last year, Aldina said.

This mine would help the company open its export channels into the Pacific, he said.

The purchase could be a bright spot for Vista as well as CN and Ridley Terminals, which have both been hit hard by idling of metallurgical coal mines in Northeastern British Columbia, Aldina said.

The new Coalspur owners are already working with Ridley to renegotiate the port's take-or-pay contract, and it is "not likely" the company would have to pay fees until the mine is finished with development, sometime in 2017, Aldina said.

Coalspur had received mineral surface lease approval in October to begin construction on the first phase of the project, but was hindered by thermal coal prices that had averaged $91.65/mt over the last five years.

Platts assessed FOB Newcastle thermal coal 6300 kcal/kg NAR at $61.65/mt Wednesday, down from 77.55/mt on the same date in 2014. Over five years, those prices have averaged $93.32/mt, according to Platts data.

Aldina projects 2015 as "one of the worst years for thermal coal in quite a while," he said. "The picture starts to get better in 2016 and 2017."

source: http://www.platts.com