Mining Revitalized in Northeast BC

Fast Facts

Northern Energy & Mining Inc. (NEMI) plans to develop two coal projects within the northeast coal fields. The first project is on the Trend property which is comprised of five mining blocks; the South, Extension, Roman, Hambler, and Q West, and is located 25 km south of Tumbler Ridge. The second project is on the Saxon property which is comprised of four major mining blocks; the East, South, North, and Omega, and is located about 120 km southeast of Tumbler Ridge. ?Due to its advanced exploration and proximity to existing infrastructure, we have decided to make the Trend property our first priority,? said David Fawcett, Chief Operating Officer of NEMI.

NEMI started new geological work on its Trend property in early 2002. Work plans for 2004 include: conducting updated geological reports for the South and Extension blocks in the first quarter; starting a feasibility study in the third quarter with completion of the study expected by the end of the first quarter in 2005; and commencement of environmental baseline programs and impact assessment studies in the third quarter of 2004.

Currently, the total classified resources for the Trend property is 57 million tonnes of coal within the South and Roman blocks. Resources for the Extension block will be developed by the end of April 2004. Based on total classified resources, annual production is expected to be 1.5 million tonnes of hard coking coal from the South and Extension blocks but development of the other three blocks could raise the production total to 3 million tonnes of coal per year. ?Production from the Trend mine is expected some time between the fourth quarter of 2005 and the third quarter of 2006. At a production rate of 1.5 million tonnes per year, the initial Trend mine is expected to have a life span of 12 to 15 years,? said Fawcett.

Status Update

Depending on which development NEMI opts for, the capital cost for the Trend project could range anywhere from $25 million to $60 million for initial mine development. ?No definite plans have been made at this point for project financing but options under consideration include an equity deal or joint-venture participation,? said Fawcett. With estimated production levels of 1.5 million tonnes per year, annual gross revenue is expected to be $100 million for this mine.

Discussions have been initiated with the Environmental Assessment Office with regard to the regulatory approval process. After NEMI has submitted its application, it will go through the EAO?s day application and review process. ?We expect the assessment and application process to get started in the second quarter of 2004 with a target date of submitting an application in the second quarter of 2005. If the application process goes according to the recommended timeline, we expect to have our approvals in place in the fourth quarter of 2005,? said Fawcett.

The company has started discussions with both rail and port service providers; talks are on-going and the pending acquisition of BC Rail by CN Rail is a key element in the discussions. ?NEMI believes the acquisition of BC Rail by CN Rail is necessary and will have a positive impact on the future of the rail system as it will end years of uncertainty of whether or not there will be a rail spur to ship over. We also believe that after the sale of Ridley Terminals is complete, it will remain open as a coal port because it is a key element in the northeast?s coal infrastructure,? said Fawcett.

NEMI has not yet entered into discussions with potential clients although the company believes there will be sufficient room in the market place to accept all production from new northeast mines. These mines produce different types of coal, thereby creating some diversification of product in the market place.

During the evaluation process, NEMI will decide whether or not to operate its Trend open-pit mine operation or hire a contract mine operator. Depending on which development option is selected, and subject to obtaining financing and regulatory approvals, NEMI?s target construction start date is the fourth quarter of 2005.

Benefits to Tumbler Ridge

The impact assessment study will identify what type of benefits Tumbler Ridge can expect to receive from the Trend mine operation. ?A mine the size of the Trend generally creates many benefits for local communities. Benefits include both residential and industrial taxes paid by mining employees and businesses that would support the mining industry and the income from mining employees would create substantial buying power and demand for local services. Revenues to municipal and provincial governments would provide support to local communities in the form of services such as medical, educational, fire, police, and other community services,? said Fawcett.

The Trend mine is expected to employ between 180 and 200 employees. ?Depending on availability of skilled mine workers, we expect to hire the majority of employees from the region, including local communities such as Tumbler Ridge and First Nations. Although previous mining companies have cumulatively employed more workers than the Pine Valley, Western Canadian Coal, and NEMI projects would require combined, and even though several hundred of these previously employed workers have left the region to find other employment, NEMI is confident there will be enough employees to operate these three mines. ?If there are not enough workers available in the region, we expect that some of the previous mine workers would return to the region after the mines start operations,? said Fawcett.

Obtaining approvals and permits from the government, securing the necessary financing, and signing contracts with clients and service providers, are all part of the mix of opening a mine. But unforeseen and uncontrollable factors such as the decrease in the price of coal or any significant increase in the Canadian dollar can have devastating affects on interest in investing in mining companies. Some residents of Tumbler Ridge might see the return of mines to the region as a return to more prosperous days but other residents might see it as an obstacle for the town to move forward and diversify its economy by exploring opportunities in other industries. The key to Tumbler Ridge?s revitalization will be its ability to capitalize on the opportunities that the government of BC is providing by revitalizing its tourism, forestry, and oil and gas industries.