It was announced yesterday a global mining giant is looking to acquire a privately-owned exploration company with properties in the Peace River Coalfield near Chetwynd.
Vancouver-based First Coal Corporation has received an all-cash offer of purchase from Xstrata Coal – a Sydney, Australia-based company with interests in over 30 coal mine projects around the world, as well as other mineral holdings – to acquire 100 per cent of First Coal’s shares, options and warrants. The offer is for $1.75 (Cdn.) per share, which would value the Canadian company at about $147 million.
First Coal's board of directors unanimously endorsed the transaction, and it will now require a two-thirds vote from the company's shareholders, which is expected to take place on Aug. 2.
Founded in 2004, the company has 940 square kilometres under tenure licence or under application for license in the Peace River Coalfield. The company has focused on its Central South property, which is expected to produce 1.5 million tonnes of coal annually over a 10 to 15 year lifespan, which was to be followed by development of another 1.5 million tonnes annually from its South Cirque property.
"From the perspective of the company – First Coal is an exploration company – moving forward with this project and the other properties that we have, a great deal of technical expertise and financial strength is required, and Xstrata brings both of those to First Coal," said Doug Smith, president and CEO of the company.
He said both of those properties are still a few years out from being put into production, as environmental assessments and extensive First Nations consultations are still required.
Smith said metallurgical (steel-making) coal is in high demand around the world, which is driving the interest in coal in the Northeast and in other places around the world. He said the region also has a few distinct advantages.
"Northeastern B.C. has both prime-coking coal and PCI coal, both of which are used to make steel. The shipping distances from Prince Rupert to Asia are closer than Vancouver and other places, so there is an advantage on the shipping side. Consumers also look for supply diversification from various places in the world – metallurgical coal is not available everywhere – so they look to diversify supply from various regions."
The acquisition of coal-producing assets in the region by foreign investors is certainly not new, as late last year a major deal was approved that saw Florida-based Walter Energy purchase Vancouver-based Western Coal – which operates three mines in the region – in a deal worth $3.3 billion.
Smith said its typical with these types of resource developments for a smaller company to undertake the exploration and permitting work and then seek third-party investment to develop the resource once it is proven.
"It requires a significant amount of capital to bring them into production, and that's where some of the larger companies come in," he said.