Coalspur Mines (CPT-T, CPL-A) believes its Vista coal project situated about 2 km from a Canadian National (CN) Rail line in Alberta has the potential to become one of the largest export thermal coal mines in North America.
In March, the junior signed a seven-year transportation agreement with CN Rail that will enable it to transport up to 12 million tonnes of coal a year to the Ridley Island Coal Terminal, a deep-water, ice-free port in Prince Rupert, British Columbia, about an 11-day’s sail from Asia.
“The agreed terms reduce Coalspur’s projected total FOB operating cost by approximately $20 million perannum over the first five years of production when compared to the Vista feasibility study,” Robin Kozar of RBC Capital Markets wrote in a Dec. 12, 2012, research note to clients. “Coalspur now projects total FOB costs to be approximately $57 per tonne in the first five years of production and below $60 per tonne in the first ten years of production.”
Coalspur and CN have also agreed to build a 6.5 km-long rail line that will give CN access to Coalspur’s loading site and enable the junior to load an entire train in one continuous load. Construction of the rail line is expected to start in the third quarter of this year and be completed by 2015.
Coalspur had already nailed down a port allocation agreement with Ridley Terminals, “one of the few coal shipping ports located on the western seaboard of North America,” Kozar wrote in a Nov. 12 research note. Ridley, he added, “has significant expansion potential and provides a shorter shipping distance to Japan and North China versus the port of Newcastle in Australia.”
“The expansion at Ridley from 12 million tonnes per annum to 25 million tonnes per annum is proceeding as planned,” he continued, “and the port is seriously considering increasing annual shipping capacity to 60 million tonnes per annum.”
Other notable developments so far this year include the securing of a US$350 million senior debt commitment from EIG Global Energy partners that will fund the majority of the development capital required to achieve first production, and the hiring in February of Richard Tremblay from Teck Coal, as Coalspur’s new vice president of operations charged with helping to bring the Vista project into production.
The Vista project, which covers about 10,000 hectares of leases, consists of surface mineable thermal coal and is designed to reach a maximum production rate of 12 million tonnes a year over a 29-year mine life. Construction is expected to start this year with first production in 2015.
Coalspur plans to build the Vista project in two phases. In Phase 1, development will be broken down into two stages: the first producing 3 million tonnes of coal and the second producing an additional 2 million tonnes.
In Phase 2, the mine will add a further 7 million tonnes a year of production starting in 2019.
The company expects to get regulatory approval to start Phase I construction in the second quarter of 2013. (It submitted its final environmental impact assessment (EIA) and Energy Resources Conservation Board (ERCB) applications to the Alberta Government for the 5 million tonnes of production on Apr. 12, 2012.)
After the company completes the regulatory process for the first 5 million tonnes per year, it will then start the application process for regulatory approval for the additional 7 million tonnes per year later this year.
Engineering studies are also underway and Coalspur expects to prepare for civil earthworks and pre-development work in the second quarter of 2013. The company also anticipates completing some bid processes and award contracts to mobilize equipment to start construction in mid-2013.
In October 2012, Coalspur completed an optimization study that slashed by 40% the estimated capital needed to bring Vista into first production from $870 million down to $527 million.
“The revised capex budget means that existing shareholders will likely experience limited, if any, equity dilution in 2013, assuming successful completion of an off-take agreement,” Kozar wrote in a research note to clients in November 2012.
A feasibility study completed in January 2012 defined a marketable reserve at Vista of more than 313 million tonnes from a recoverable reserve of 566 million tonnes.
The coal seams at Vista are gently dipping and come right to surface, making mining conditions relatively easy.
On a site visit in 2011, management told The Northern Miner that it expects the mine will be very similar to the prairie coal mines west of Edmonton that supply coal to the Alberta power plants—a mix of large truck/shovel and dragline.
In addition to the leases it holds at the Vista project, Coalspur holds leases to the south covering about 23,300 hectares that it is calling the Vista South project. Vista South contains about 471 million tonnes of coal in the measured and indicated category and another 605 million tonnes in the inferred. The company also owns about 14,400 hectares of leases on the northeastern boundary of the Vista project that it calls the Vista Extension.
Coalspur’s largest shareholder, with a 24.3% stake, is Highland Park, a group of successful and experienced mining executives.
Over the last year Coalspur Mines has been trading within a range of 50¢-$1.79 and at presstime in Toronto was trading at 58¢. The junior has about 628 million shares outstanding.