VANCOUVER — It looks like financing will be the last hurdle for Coalspur Mines (TSX: CPT, US-OTC: CSPZF) at its Vista thermal coal project, 10 km east of the town of Hinton, Alta. On Feb. 27 the Alberta Energy Regulator (AER) approved Vista, noting that it would provide socioeconomic net benefit to the region and the province.
Over the past three months Coalspur came to agreements with one private oil company and three First Nation bands in order to secure its permits, which could allow the company to start production at Vista by 2016.
The AER approval includes 26 conditions relating to Vista’s coal processing plant, mine plan and end-pit lake, geotechnical investigations, fines management, surface water quality, wetlands, wildlife and noise mitigation.
Coalspur aims to finalize detailed licences and permits over the coming months.
In December Coalspur reached an agreements with the Ermineskin Cree Nation and the Whitefish Lake First Nation, which had claimed intervener status pursuant to the AER approval process. The deals formalized the relationships between the parties and create mutually beneficial opportunities for community development, infrastructure and business opportunities, and ensure First Nation participation in ongoing environmental monitoring.
“We are pleased with the agreements and in particular the focus on direct involvement of our First Nations in ongoing environmental monitoring,” Ermineskin Chief Craig Mackinaw and Whitefish Chief James Jackson Jr. said in a joint statement.
“Coalspur worked very hard with us and came to understand that if the Vista project benefits Hinton and other communities, it also has to benefit First Nations,” Mackinaw added.
A few days later Coalspur struck a deal with Tourmaline Oil Corp. over concerns relating to its oil and gas development rights, which overlap Coalspur’s mineral development rights at Vista.
The company inked a deal with the Alexis Nakota Sioux in early January, which set the stage for Vista’s eventual AER approval.
Coalspur spent US$19 million on Vista during the first nine months of 2013, which compares to US$14.7 million in expenditures over the same period in 2012. Most of the additional funding was directed towards efforts to get regulatory approvals.
The company also updated its development plan, which now features a 6-million-tonne-per-year thermal coal facility that could be expanded to 12 million tonnes. Capital expenditures on the project are pegged at US$458 million.
Coalspur still has a ways to go to fund Vista, however, as the company has secured US$350 million, but needs another US$150 million to develop the project.
The company would likely add equity or offtake agreements to decrease its debt financing, which was secured at an 11% interest rate.
BMO Capital Markets analyst Meredith Bandy — who dropped her stock rating to “market perform” and target price from 35¢ to 30¢ after the announcement — wrote in a Feb. 28 research note that “BMO Research is downgrading Coalspur on concerns the company may have difficulty financing [Vista]. Coal demand remains robust, but unfortunately supply remains even stronger. Seaborne thermal coal appears oversupplied, pricing is weak and, as a result, coal greenfield projects remain deeply out of favour.”
Coalspur shares have traded within a 52-week window of 16¢ and 79¢, and rose 16% after its permitting announcement en route to a 32¢ close at press time.
The company maintains 641.4 million shares outstanding for a $205-million market capitalization.
On Jan. 28 Coalspur secured a “standby” funding facility of $10 million to spend as it wraps up Vista’s regulatory approvals and secures project funding.
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