Western Canadian Coal commences Dillon production

Vancouver – Production has commenced at Western Canadian Coal’s (WTN-V) Dillon mine, located on its Burnt River project near Tumbler Ridge in northeastern British Columbia.

The first 102-car train has been loaded with coal and was shipped to Ridley Terminals at the Port of Prince Rupert on British Columbia’s north coast.

The company produces coal classified as PCI (pulverized coal injection), a product that has low sulphur, ash and volatile content, and is used in steel production as a replacement for the very expensive coking coal. The primary market will be the Asian steel mills.

The Dillon mine, with estimated saleable reserves of 1.56 million tonnes of PCI coal, was developed for a capital expenditure of about $7-million. Production from the Dillon open pit is trucked 94 km to the Bullmoose Load-out facility, under a usage agreement from Teck Cominco (TEK-T), consisting of a ground storage yard, twin 12,000-tonne silos and rail car loading infrastructure. The branch rail line, built by BC Rail, runs from the loading facility, through the Wolverine Valley, and connects with the Canadian National (CN) line.

With a memorandum of understanding (MOU) in place, Western Canadian Coal is finalizing a 10-year agreement with Ridley Terminals to provide services through its bulk coal handling facility. The company will also have the option for two five-year renewals to the agreement.

Dillon coal reserves are contained in two separate seams, upper and lower, having a relatively low waste stripping ratio of 2.17:1. The upper seam averages 2.4 metres in thickness with a 9.5% ash content. The lower seam, containing the majority of the reserves, averages 5.2 metres and has a very low ash content of 3.4%. The seams are mined separately and can be blended to produce the desired product, dependent on purchaser requirements.

Initial contract mining at Dillon will be undertaken at rates of up to 60,000-tonnes-per-month. The operation, presently with a small-mine permit for 250,000 tonnes annually, has filed application for an increase to 400,000 tonnes annually.

Adjacent to Dillon, is the company’s larger Brule deposit having historic reserves of 32 million tonnes of coal, based on Teck’s work in 1981. Work programs have commenced enroute to applying for an Environmental Assessment Certificate and mine permits. With Brule production anticipated in 2006, combined targeted output from the project is expected to be in the order of 1.5 million tonnes annually of PCI coal.

Western Canadian Coal has 55 million shares outstanding and a capitalization of about $311 million. The market jumped on the issue following the announcement of initial production, driving up the share price by about a dollar to the $5.66 level on high volume of over 1.6 million shares.