Western Coal in conversation

altAt the March 23 grand opening of Western Coal’s Tumbler Ridge office, the Tumbler Ridge News interviewed Western Coal CEO Keith Calder, who joined the company as president and CEO in December 2009. Since then, Calder has overseen Western’s northeast B.C. production increase from two million tonnes of metallurgical coal per year to four million tonnes per year, as well as the creation of a regional office in Tumbler Ridge. The company is looking to hire up to 250 more employees in the region.
Tumbler Ridge News: “Tell us about the reasons behind your recent donation to the Shock Trauma Air Rescue Society (STARS).”
Keith Calder: “When we had that accident last December, and Chris Hawley was badly injured.. and STARS came in and landed under those bad weather conditions, and off they went, they saved Chris' life – there's no doubt about that. When I heard about this, the first thing I did was call up STARS and thank them personally, and we immediately put out a donation of $5,000.”

“When we look at northeast B.C. and some of the things that we're doing up here, we're trying to make this an attractive place for people to live and work – we've always said we really want people to come live here; we don't want people to fly in and fly out, and we're trying to avoid camps. We have a number of initiatives on the go right now to try and improve the quality of life up here for people. It's a great life already, but there a number of things we can do to help. We're not going to replace the local government or the B.C. government, but there are things we can do.”
“As we're reviewing those, one of the things that came up again in our discussions was medical care; we want good schools up here and good medical care and we'll do everything we can to support that. A part of medical care is access to facilities, and STARS is a company which provides an outstanding service, and it's so important to have that up here. We talked to them a little bit more, understood what their cost structure was, and we agreed that we would come in with a $500,000 donation over a five-year period.”
TRN: “That donation must be a significant chunk of the STARS budget.”
KC: “You would be surprised how large their budget is; that would only put us in the top 20 contributors. But we still think it's an important thing for us to contribute to. Their budget would run into the tens of millions of dollars. They provide service for all of northeastern B.C. and all of northern Alberta; it's a very big organization.”
TRN: “Let's talk about the future of Western Coal in Tumbler Ridge. Western announced a new agreement with Ridley Terminals recently, could you explain more about that?”
KC: “It's a  new modified agreement with Ridley Terminals. We have defined guarantees for both sides. There's a minimum guarantee that we will give them 40 million tonnes over a ten year period, and there's a minimum tonnage they will take from us, which is higher than that, which meets with our projected goals of increasing production here. So that was an important step forward for us, but there's more to it than that.”
“Ridley Terminals wants to expand. But it's a federal asset, and the federal government was not in a position to give them funding. So what Ridley was asking for was to go to the banks to finance their expansion. There's two things that are neccessary there: one thing is of course permission from the federal government for them to go out, as a federal asset, and seek private financing – and we're supporting that. We've been talking to federal and provincial politicians to make sure they understand the importance of that.”
“We hope that very shortly they'll get that permission, then they'll go to the banks, and the banks will say quite simply 'What guarantee do we have that you'll have the cash flow in order to eb able to pay back this loan?'. One of the major guarantees that they would require is guaranteed throughput. That's why this idea of having 40 million tonnes of capacity guaranteed over the next ten years was important to Ridley Terminals.”
TRN: “Has Ridley been seeking these kinds of assurances from all their coal mining customers?”  
KC: “You'd have to ask Ridley that. We don't discuss other people's contracts; we really only negotiate our own. We certainly do lookm out for the broader industry requirements, but I'm not privy to what they're asking of our competitors. Our competitors include not only the coal industry, but the petroleum coke industry, the wood pellet industry.. there's a whole range.”
TRN: “Where does this leave Western Coal with respect to the Ridley Terminals User Group?”
KC: “All the members of the Ridley Terminals Users Group negotiate individual contracts with Ridley Terminals. It would be breaching anti-competition laws if we didn't do that. What the users group is suggesting is that you have a federal asset, and a number of different ways in which that asset can be managed. It's currently managed by a federally-appointed team, and that management teams reports to a board of directors and the chairman. That's the way its operated right now.”

“What we're suggesting, as the Ridley Terminals User Group, is that the users of the facility could operate it as well. It will remain a federal asset; the users group would operate the facility, they would pay an annual dividend to the federal government because the assets are theirs and they deserve to have a return for the people of Canada. The expansion, maintenance and operation of the port would all be managed through that users group, and therefore access to that cash would be easier to come by, and growth would be timed based on the users group requirements.”
TRN: “How does that proposal fit in with the discussions now happening with the federal Transportation Minister?”.
KC: “We want the expansion; we think it's very important. These are two different methods of achieving the same thing. If Ridley Terminals were to embark on this expansion program, and at the same time the federal government decided they wanted to have an alternative management system for Ridley Terminals, and the user group was chosen, the users group would simply go in and accept the debt, which we'd be comfortable with because we all agree on it.”
TRN: “What's the next chip to fall into place as far as this expansion discussion goes?”.
KC: “The federal government will have to formally allow Ridley Terminals to go out and raise capital. We're awaiting that decision. I think it's likely to happen, but I can't decide what the government's going to do. It makes perfect sense to do it.”
TRN: Let's talk about the merger – the shareholders meeting is March 8.
KC: “Western shareholders get to vote on this; Walter shareholders do not. We'll have our shareholder vote on March 8 in Toronto, where an awful lot of our shareholders are. I think it's a very high probability of it going ahead. It's a very good deal; it's good for Western shareholders, it's good for Walter shareholders, and as a company going forward, it's an amazing positive combination. If you look at where we were 14 or 15 months ago, Western Coal was a $600 million market capitalization. That was the market's view of what we were worth. Since then, we've doubled our production, lowered our operating costs – we're currently valued at $3.3 billion dollars. With the combination, we'd become a $10 billion company. I believe this deal will go through, because it's a fantastic deal for everybody involved.”
TRN: “Regarding the accident last December – what new safety procedures have come into to place to prevent someone from backing over a berm?”
KC: “The investigation is still ongoing; we still want to talk further with Chris. We have have very good systems in place; I think it's important to realize that we have to go through the full investigation, understand everything, and make sure that we're making the right decisions in terms of any modifications. We have very good systems in place right now; the accident should not have happened.”
TRN: “Regarding the proposed Internet deal in Tumbler Ridge, Western Coal had proposed to put $470,000 towards it. Does that number remain the same?”.
KC: “That sounds correct. What I know is that between the District of Tumbler Ridge and ourselves, we're going to pick up half the cost of the project. This is an effort on the part of Tumbler Ridge and Western Coal to upgrade the Internet system here, and we're pushing Telus. Telus has an awful lot on its plate I suppose, but we continue to push them. As far as I'm concerned, this should happen. The funding is in place right now, and Telus just needs to move forward.”
TRN: “Is there anything else you'd like to add to this interview?”.
KC: “We've had a very successful year. We've grown our company significantly, we've doubled our production, we added over 300 new employees in the Tumbler Ridge and Chetwynd area over the past year. We have a good story behind us – the metallurgical coal markets are in our favour right now, and we continue to invest in our operations up here.”
Editor’s note: Last Tuesday (March 1), Walter Energy named Keith Calder as its new chief executive officer upon completion of the their acquisition of Western Coal. Calder will replace interim Walter Energy CEO Joe Leonard. Both will be on the company’s board of directors. The company's head office is expected to move to either Vancouver, B.C. or Birmingham, Alabama.