From Stockhouse message boards,
SUBJECT: Willow Creek mine
Post Time: 12/13/2006 08:40
2-year-old B.C. coal mine closed, seeking buyer
The Willow Creek mine's problems began when the quality of its coal changed
Scott Simpson, Vancouver Sun
Published: Wednesday, December 13, 2006
Just two years after it was hailed as British Columbia's first new coal mine in 20 years, the Willow Creek Mine near Chetwynd is shut down and looking for a buyer.
Pine Valley Mining Corp. president Robert Bell said Tuesday that operations have been suspended at the metallurgical coal mine, and that the company is under creditor protection by B.C. Supreme Court.
Bell said the company's problems arose from a series of circumstances, including mining equipment failure, a drop in coal yields, and a lack of financial resources.
Bell said the court has given direction to seek either a restructuring or a potential sale, "but I would say the focus has been more on the potential sale."
"I can't give any details on the specifics, but we've certainly had very good interest. Our process is continuing on that basis," Bell said in an interview.
Bell, a past chairman of the Coal Association of Canada, joined Pine Valley only 11 months ago. Within a few months, problems began to surface when the quality of the coal changed at the Willow Creek open pit mine.
According to Pine Valley's 2006 second-quarter report, production costs "increased dramatically" as mining advanced to a new area where the coal deposit did not correspond to what had been anticipated in the original Willow Creek feasibility study.
The company thought it was ready for a change in the geology of its resource, and had built a wash plant designed to separate marketable "clean coal" from waste material.
However, they began to encounter coal in the form of a powder too fine to be recovered in the wash plant -- after processing, the coal yield fell to 50 or 60 per cent, compared with the 75-per-cent yield anticipated in the feasibility study.
The remainder of the coal was simply being washed away.
As well, basic production volumes were lower than the target.
"Coal is a bulk commodity and your costs are driven in large part by your volume," Bell said. "If you don't get production, your unit costs go up quite dramatically, and we had that problem as well."
The company scrambled to keep up its commitments to international customers by digging out other areas ahead of the long-term mining schedule -- but shipping commitments were still missed.
Costs piled up and eventually the company began losing money -- despite some of the best international market prices for coal in more than 20 years.
Bell said efforts to obtain additional cash to upgrade the wash plant were unsuccessful, so a decision was made to suspend operations.
Pine Valley's balance sheet for the first six months of the 2006 fiscal year shows a net loss of $8.2 million, compared with a net gain of $1.8 million in the same period a year earlier.
"I can see the value that there is in this asset, and some things were done very well. Now we have to make sure we can capitalize on that and see someone come in and get our employees back working again, and get the site up and running."
ssimpson@png.canwest.com
© The Vancouver Sun 2006
