Grande Cache inks supply deal (December 27, 2004)

Grande Cache Coal (GCE-T) has entered into an agreement to sell more than two-thirds of its hard coking coal production in 2005.

Under the deal, Korean steelmaker Posco (PKX-N) and a group of Japanese steel industry customers will buy a total of 1.3 million tonnes of coal at US$125 per tonne. The agreement covers the year beginning April 1, 2005.

“The pricing is in line with recent term contract settlements made by major producers in our industry and reflects the continued tight market conditions for hard coking coal,” says Grande Cache CEO Robert Stan. Talks with other steel mills continue.

Late last month, the company shipped its first, 35,000-tonne batch of high-quality metallurgical coal from the Grande Cache property to Japan’s JFE Steel via the Westshore terminals, near Vancouver.

The Grande Cache No. 12S B2 surface mine is situated in the Smoky River coalfield of west-central Alberta. The mine, which was operated between 1998 and 2000, resumed production in August; sales started up in October. The operation has a lifespan of 4 years.

More recently, the company cranked up its No. 7 underground mine, which produced its first pre-development ore in late November. Construction continues, and production is slated to ramp up to 100,000 tonnes per month early next year.

In all, Grande Cache holds 150 sq. km in the area, including both underground and surface mining operations. In all, the company expects to produce 24.7 million tonnes of salable coal over 12 years. Exploration aimed at boosting reserves is ongoing.

At last count, the company’s surface mines (nos. 8, 12 and 16) were home to 19.5 million tonnes of salable reserves (10.4 tonnes at the No. 16 East mine); the No. 7-4 underground mine contains 5.2 tonnes.

Grande Cache intends to file final applications for the area next spring, with approval expected in a year.