Curragh puts Westray coal mine up for sale

Raising money to build new mines in Canada can be a trying experience, especially in today’s tough market conditions. Lead-zinc producer Curragh Resources (TSE) recently cancelled a planned debenture offering and placed “all or part” of its new Westray coal mine in Nova Scotia on the block.

The move could net the company as much as $20-$30 million. But the announcement comes at a bad time for the $120-million mine.

Westray is currently going through the usual challenges of a new operation — supplying enough coal to the wash plant to meet production targets. Underground productivity has temporarily slowed because of experimental work on ground control measures.

More active faces in the room-and-pillar mine are being developed and production should soon be up to specifications.

By March, 1992, the amount of coal delivered to Nova Scotia Power, the mine’s only customer so far, will be only 30% of the annual contracted amount of 445,000 tonnes for the first year. Such production shortfalls were anticipated and allowed for in the contract, however.

The mine, which has 30 years of reserves, is to deliver 700,000 tonnes in the second contract year. Nova Scotia Power has agreed to buy similar amounts for a total of 15 years.

The obvious bidders for the Westray mine, one Toronto-based analyst says, is RTZ of London or coal producers based in the U.S. RTZ already has energy-related assets and U.S. coal producers are experienced underground coal operators and could possibly assist the mine in selling the 300,000 tonnes of annual capacity not contracted for.

Curragh decided not to go ahead with a planned $55-million debenture issue because of poor market conditions. In another move to raise cash for new mines and to reduce debt, the company is also unwinding a relationship with Banco Espanol de Credito and Asturian de Zinc, a zinc smelter in Spain. The company’s main new mine development is the Vangorda/

Grum project in the Yukon. It will replace production from the company’s major asset, the nearby Faro open pit mine. Another Curragh development, the Stronsay project in northwestern British Columbia, was recently given the green light by the provincial government to proceed with construction. Curragh recently began production at a third lead-zinc mine, Sa Dena Hes in the Yukon.

Patrick Whiteway is editor of Canadian Mining Journal, a Southam publication.