In mid-December, Morien Resources Corp. agreed to sell its 25% interest in Donkin to Kameron Collieries LLC, a Cline subsidiary, in exchange for $5.5 million in cash and tonnage royalties. Cline/Kameron previously purchased 75% of Donkin from Switzerland’s Glencore Xstrata Plc, one of the world’s largest metals and mining companies.

Morien, based in Dartmouth, Nova Scotia, and spun off from Erdene Resource Development of Halifax, Nova Scotia, in December 2012, will receive $2 million in cash from Cline once the transaction closes. Morien will be paid another $2 million at the earlier of the first commercial sale of coal from Donkin and the second anniversary of the sale closing. The final $1.5 million will be forthcoming at the earlier of the first commercial sale of export coal from Donkin and the third anniversary of the sale closing.

In addition, Morien will receive royalty payments from Kameron/Cline of 2% of all revenues for the first 500,000 tons of coal produced and sold from Donkin in any calendar quarter and 4% of revenues for any production above 500,000 tons in any calendar quarter. Morien also will get royalty payments amounting to 2% of revenues from petroleum and natural gas products and coal bed methane produced and sold from the Donkin project.

At one point, Morien considered owning all of Donkin after Glencore disclosed in 2013 it would divest its majority stake in Donkin primarily because of the singular nature and size of the project. Donkin, which is fully permitted, is located along the Atlantic Ocean on the rugged northeastern coast of Cape Breton Island, a part of Nova Scotia. Once in production, possibly sometime in 2015, the mine is expected to turn out up to 3.6 million tons of coking and steam coal annually for both domestic and export markets.

Morien said it had dedicated “substantial resources” to evaluating various options for advancing the Donkin project and believes the Cline arrangement “will deliver significant value” for Morien’s shareholders while reducing financial risk and further shareholder dilution. About $43 million has been invested in the Donkin project since 2006, including about $15 million by Morien.

According to Dawson Brisco, Morien’s manager of corporate development, Cline is negotiating a potential coal supply contract with Nova Scotia Power, an Emera subsidiary and the Canadian province’s largest electric utility. An agreement could come in early 2015.