By Lee Buchsbaum
While Teck’s prolific mines in southeastern British Columbia extract the lion’s share of the metallurgical coal produced in Canada, a growing number of companies, each spurred by Asian demand, are ramping up expansion plans for the long under-used met resources in the northeastern Peace River coalfield. Located north of Prince George near Tumbler Ridge, geological studies estimate the region holds more than 8 billion tons of high quality metallurgical coal. In today’s tightening met market, “the northeast is becoming the new hot spot,” said Pierre Gratton, president and CEO, British Columbia Mining Association.
Tumbler Ridge itself was developed in 1980 as a coal mining community where workers would be able to live and play while commuting to new mines coming on-line near town. History has a way of repeating itself as these met mines were also developed at the behest of Asian investors. But 30 years ago, the big Asian story was the economic power of a resurgent Japan that was buying up real estate and natural resources all over the world. So bullish was the Canadian government on Tumbler Ridge’s fortunes that it had then federally-owned Canadian National Railway build a very costly new electrified rail line through the area linking to the mainline in Prince George. From there, CN prepared to take unit trains straight to the deep water, ice-free port of Prince Rupert where a new bulk cargo terminal, Ridley Island, was built to handle seaborne vessels.
All went well for many years until Japan’s economy began to slow down in the 1990s leading to the shutdown of all of the mines in the Tumbler Ridge area around the turn of the century. Eventually CN de-electrified its railway as the costs couldn’t justify the reduced traffic on the line. The large Quintette mine, owned by Teck, closed in August 2000 after producing more than 67 million metric tons (mt). This was followed by Bullmoose, partially owned by Teck and BHP Billiton, which closed in 2003 after producing 34 million mt. This was a devastating economic blow as the mines were the largest employers in the area. But the fundamental metrics underpinning the world metallurgical coal markets have not significantly changed. It was only a matter of time before another rising industrial power would come calling for more resources.
Today one of the main competitive advantages of the northeast is its infrastructure. In Prince Rupert, it has an under-used port, and Canadian National has tremendous rail capacity. “We are just barely scratching the surface now. Rupert can handle 14 million mtpy of coal and is expandable to more than 20 million mtpy. It is approximately 950 km to Prince Rupert’s port from the Tumbler Ridge area mines,” said Gratton. For seaborne met customers, it’s about 36 hours shorter sailing time from Rupert than from Vancouver, so it’s less expensive for them to load.
In addition to all of the capacity benefits, another edge this area has is it provides customers with a greater diversification of source and supply. The mature producing Elk Valley coalfields are all controlled by Teck whereas the Peace River coalfield has several players all with ambitious expansion plans. Another consideration is, over the last few decades, an increasing number of “wealthy Calgary oil folks have been buying up land in the Elk Valley, bringing with them a desire to stop development. Teck is aware that bringing the next southeastern British Columbia mine into production is going to be more difficult,” said Gratton.
China Surges and the Ripple Passes Through Tumbler Ridge
Donald Lindsay, CEO of Teck Resources, terms what’s happening in China today a “fundamental structural shift” as the country is now producing seven times the amount of steel as the United States does. Even more telling, China is rapidly constructing huge new blast furnaces and integrated steel works, shifting steel production from inland to new coastal mills. Many of these new mills are being built with deep-water ports integrated into the plant. The newly built Capital Steel Caofeidian Project, which has the fourth largest blast furnace in the world, was recently constructed on 100 acres of reclaimed land on a man-made island off the coast. Adjacent to it is another plant, nearing completion, which will have the second largest blast furnace in the world. After these plants are built, demand will be nearly permanent. They will each need large amounts of very high-quality coke, Lindsay explained. It’s estimated that when the build-out is complete, China will have the capacity to produce 200 million mt of steel along its coasts, and each of these plants will have access to seaborne met coal.
A rapid shift in buying and importing patterns last year shows how quickly China has caused the world to turn. In 2008, China imported roughly 3.2 million mt of metallurgical coal. In 2009, it imported more than 30 million mt. In 2010, some conservative estimates place that number at 40 million mt. There may have been a global economic meltdown, but it sure didn’t occur in China. What does this mean for northeastern British Columbia? Opportunity. The Canadian government is eager to develop the area’s resources, as well as to further expand the under-used ocean port in Price Rupert that, because of its more westerly location, is over one sailing day less to China than Vancouver’s port. And rail traffic along the corridor from Jasper, Alberta, to Prince Rupert, B.C., is only a fraction of the density currently on the CN and Canadian Pacific mainlines that the Elk River coal mines use.
Several companies including Western Coal (formerly Western Canadian Coal), the Peace River Coal Partnership (AngloAmerican/Vitol BV/NEMI), which recently purchased Hillsborough Resources and its Trend mine, and others are looking to take advantage of a growing opportunity. These established players are joined by a new company, First Coal, which is also seeking to develop several major deposits in the area.
Western Coal Ramps Up
Western Coal, formerly Western Canadian Coal, has become the largest producer in northeast BC and it has aggressive plans to increase production from the 2.2 million mt produced in 2009 to 7 million mt beginning in 2014. Despite a down year in 2009, the company is “all sold out for 2010. As we grow, we’re just trying to meet all our contract commitments,” said David Jan, director of investor relations. Western mines two types of high quality metallurgical coal, a low-vol PCI that comes from its Brule operations and high quality coking coal from Wolverine. Future production from Willow Creek will be both low-vol PCI and coking coal as well.
Located 25 km from Tumbler Ridge, the Wolverine mine, as a result of the recession, produced only 1.6 million mt in 2009. In 2010, Western expects to produce closer to 1.8 million mt and the company is developing the reserve base to take the mine up to 3 million mtpy over the next few years.
Western’s next largest mine, the Brule open-pit mine, also had its expansion held back by the recession. Last year, Brule produced just over 600,000 mt, though it has the potential to mine 2 million mtpy by using facilities at the adjacent Willow Creek mine, now being prepped for production. Western’s first operation, Brule, produces ultra low-vol, PCI coal for export, primarily to Korea and other Asian countries. Western claims that ultra low-vol, PCI coal can replace up to 30% of the coke feed in a given blast furnace, thereby significantly reducing steelmaking raw material costs. Brule’s coal has a high calorific value, low ash level, and volatile content of less than 15%. In 2009, Western had hoped to bring Willow Creek into production, but the uncertainties of the recession forced them to wait. With the current favorable market, Western is now rapidly moving forward. Originally opened by the Pine Valley Mining Co., Western purchased the mine out of receivership and was “set to get it back into production when the market collapsed,” said W.D. “Bill” Burton, senior vice president-engineering and project development. But with the turnaround, Western believes it will only take it a few months to begin producing at a 900,000 mtpy run rate while heading up to 1.8 million mtpy or more in coming years.
Western is primarily a truck-shovel operator, using a variety of electric shovels and hydraulic excavators. “The backhoes are used for the coal production and for removing overburden that is close to the toe. With often fairly steep dipping seams (25º to 40º), the Western mining plan is still evolving, especially the drilling and blasting sequences. We work horizontal benches, always coming up on a seam. At Perry Creek, part of Wolverine mine, we have a large anticline and syncline to deal with as well,” said Burton. Other factors to consider are the multiple seams in the area. “We don’t mine coal from seams thinner than 1 m in thickness. But at Perry Creek there are seven different seams, with a total thickness that varies from 17 m to 18 m, though some are only a 1.5-m thick,” said Burton.
Western also employs a thermal dryer in its prep plant to control the moisture. “Our product specification is 8% moisture in the boat. In the winter, having too much moisture in the coal can lead to handling problems. And, when the coal gets to Prince Rupert for transloading to a ship, we don’t want it to go like one big black popsicle,” said Burton.
To help it ramp up, Western is purchasing additional 240-ton haul trucks for use at the expanding Wolverine mine. As they arrive this year, they will displace older, smaller trucks that will be used at Brule to help take production up there as well. “Wolverine is our largest operation. It can handle the larger equipment that Brule, which is smaller and tighter, can’t,” said Jan.
First Coal Develops Innovative Highwall Mining Strategies
An aggressive management team at First Coal, led by CEO and industry veteran Doug Smith, will take bulk samples this February as it fine tunes an innovative trench mining strategy to mine steeply pitching seams in the region.
Using a specially modified Addcar Highwall Miner, First Coal “believes its unit is the first instance for a highwall miner to be used in this sort of application. We started looking around the world to determine what’s the best way to mine this property. This type of geology is characteristic of this region. We started looking at trenching and eventually had discussions with Addcar, who could see the vision that we have,” said Smith.
Addcar made several modifications for First Coal. The company’s highwall miner was designed as a more narrower unit to be able to mine a 1-m wide seam, dipping 45º. “What we’re doing is creating 600-m trenches on strike. Our seams measure up to 3 m, so Addcar built a narrow conveyor for us. They’ve come up with different type of miner-head, more a cutter head on a pivotal arm—still a gathering head like a conventional continuous miner, but it can cut a seam on an angle of 45º to vertical, up to 4-m high,” Smith said.
Over the past two years, First Coal and Addcar have been working to develop equipment, which went through some trial runs in Kentucky last September. “We tested cutting angles, but haven’t yet tried its ability to mine in 300 m. But the modified miner can cut on the angles we needed it to,” Smith said.
“We felt that in order to get the production quantities we wanted, we would end up moving a lot of material and have a rather high strip ratio. To reduce costs, this is what we came up with. Compared to conventional mining there is much less surface disturbance and we will have stripping ratios of 4:1 instead of 10:1 and higher,” Smith said.
“It’s on our property now and frankly, I’m excited to get going and prove it out,” Smith said. With more than 33 years in the coal industry, Smith joined First Coal after 12 years as president and director for U.S.-based Andalex Resources. He previously worked in numerous positions over an 18-year period with Luscar Ltd. in Alberta. Smith served as vice chair and director of Neptune Bulk Terminals Canada Ltd., director of the Coal Association of Canada, chairman and director of Los Angeles Export Terminal and the Utah Mining Association.
First Coal plans on going into limited production of 250,000 mtpy within the next year using two modified highwall miners, one narrower than other. At this stage, its strategy calls for the use of a highwall miner on both the Central South and South Cirque properties, beginning with Central South which has been explored for this application. “We expect to produce approximately 1 million mt of raw coal per machine, which should yield up to 3 million mt of clean coal. We’ll need three to four modified machines for that to occur,” Smith said.
Buchsbaum is a Denver-based freelance writer and photographer specializing in industrial subjects. He can be reached through his Web site at www.lmbphotography.com or by phone at 303-746-8172.