Northern Energy & Mining reports strong finances

NEMI Northern Energy & Mining (NNE.A-T, NNEMF-O) is in a relatively strong financial position with working capital of $9.7 million and no long-term debt, according to recent financial statements, but the mine developer plans to reduce its stake in the Peace River Coal Partnership to 12% this year.

NEMI says it will also evaluate other business opportunities, including acquisitions of mineral assets.

NEMI currently owns a 20% interest in the Peace River Coal Partnership, which owns the Trend mine plus other coal properties in northeastern British Columbia.

PRC is a consortium that is 65.9%-owned by Anglo Coal Canada, a unit of Anglo American (AAUK-Q, AAL-L), one of the world’s largest mining firms, NEMI (20%) and Hillsborough Resources (HLB-T, HLSRF-O) (14.1%).

The coal partnership’s 2008 program and budget will require $198 million in spending, NEMI’s share of which is $39.6 million, the company says.

But under the November 2006 agreement, the partners can dilute their interest if they elect not to participate fully in the project’s funding requirements. NEMI has decided to fund $5 million of the 2008 budget, for a 12% interest.

NEMI “determined that the amount of dilution existing shareholders would suffer would be greater than the amount of dilution that occurs as a result of electing to contribute a smaller amount to the 2008 program and budget,” the company says in a December press release.

Under the partnership deal in 2006, NEMI contributed its full interests in its coal properties — including all of the Trend mine and related assets, as well as the 50% interest in the Belcourt Saxon limited partnership that it held with Western Canadian Coal (WTN-T, WXJXF-O). The Belcourt Saxon property covers 500 sq. km of coal-bearing licences, about 30 km south of the Trend mine.

In exchange, NEMI received a 20% interest in the coal consortium and about $83 million in consideration consisting of cash and payments and being carried for up to $18 million for all cash calls required of the partners until Dec. 31, 2007.

NEMI is a newcomer to the coal business. It shipped its first coal from the Trend mine, near Tumbler Ridge in B.C., in April 2006.

The mine produces low-sulphur, medium-volatile coking coal.

The coal consortium started up the Trend mine again in January 2007. Equipped with a new $20-million coal wash plant, the first shipment of coal for the Japanese market was loaded during March. Coal shipments to international markets continued through the second quarter.