Xstrata snaps up First Coal

Global coal giant Xstrata (XTA-L) has recently sealed a $147-million cash offer for privately-held First Coal and its northeastern B.C. coking coal assets.

Xstrata’s coal division made the bid in late July to access 528 sq. km of licensed property and 412 sq. km of land, with licenses pending in B.C.’s Peace River coal fields. 

The plan of arrangement closed in early August, with First Coal becoming a wholly owned subsidiary of Xstrata Coal Canada.  

Douglas Smith, president and CEO of First Coal, said by phone that the deal was about six months in the works, and came in part because “as a junior company, we’re always out looking for funding.”

First Coal’s most advanced project is the Central South target, with the South Cirque next in line for development at 10 km east. Together the two projects host historic, non-compliant resources of 655 million tonnes from work done by Gulf Canada Resources in the early 1980s. First Coal’s properties host 1.6 billion historic tonnes from Gulf Canada’s work.

In terms of compliant resources, First Coal has so far established 15.5 million measured tonnes, 28 million indicated tonnes and 35.4 million inferred tonnes at Central South. The coal seams host significant amounts of medium volatile coking coal and pulverized coal injection coal.

The coal deposits are unusual because the 1- to 3-metre-wide coal seams dip from between 55 degrees to near vertical, with the seams exposed at surface and separated by varying thicknesses of interburden. First Coal plans to mine the seams using a combination of trenches and modified mining equipment that would see no personnel underground but also avoid a full open pit. The company says it is the first time in the world this method would be used.

Smith said the company was in the process of testing and proving the mining method and that it would be up to Xstrata to decide on a future mining plan.

First Coal planned to put a 1.5-million-tonne-per-year operation into production by 2014 at Central South, with the same size of operation planned to start at South Cirque in 2017. The company had started a 50,000-tonne bulk sample last year to further test the mining method.

The company ran into trouble last year, however, when the West Moberly First Nations objected that it had not been properly
consulted before the bulk sampling and road work started. The West Moberly also maintained that the work threatened the 11 caribou that form the endangered Burnt Pine herd. 

Work on the project was subsequently halted by the Supreme Court of British Columbia, ruling in favour of the West Moberly and the need for more consultation. The Court of Appeal upheld the Supreme Court’s decision in May. 

First Coal was forced to abandon a $15-million work program planned for this summer as it waited for the province, which
is responsible for conducting proper consultations with the First Nations, to complete the process.

Asked if Xstrata was concerned about the suspension, Smith said that “Xstrata has a reputation for working well with aboriginal groups around the world and they expect to do that here as well.”

First Coal was formed in 2004 and has spent about $65 million developing its projects.