By the time this story comes out, the Wolverine Mine should have a new owner.
On August 8, Conuma Coal Resources Limited and Walter signed an Asset Purchase Agreement, and on August 16, Madam Justice Fitzpatrick approved the sale, which is expected to be finalized as of September 1.
Tom Clarke is CEO of the Virginia Conservation Legacy Fund, Inc. and Treasurer and co-founder of ERP Compliant Fuels, the parent company of Conuma Coal Resources. He says he’s not superstitious around these things, but doesn’t want to discuss the company’s plans for the properties until after the sale goes through.
He does confirm the Brule Mine near Chetwynd will be the company’s entry point into opening up the properties. “It’s based on the demand of market,” says Clarke. “Brule produces Pulverized Coal Injection (PCI) coal. There’s a high demand for that right now. We are going to start out with that, then move to Wolverine then to Willow Creek. After that, we get into unexplored territory.”
While he’s unwilling to attach a timeline, sources speculate that Wolverine could open as soon as next year, depending on market conditions. Right now, metallurgical coal prices are spiking, with the spot price for coking coal climbing by over 60 percent since the start of the year. That’s the biggest gain in prices since 2011, when Australia’s Met Coal industry was hit by flooding.
While commanding a lower price that the premium coal from the Wolverine Mine, Brule’s PCI coal is generally in higher demand. There are three main categories of metallurgical coal: hard coking coal, the lower quality semi-soft coking coal and PCI coal.
PCI coal is generally not considered to be a coking coal. Instead, it is used in steelmaking primarily for its heat value. It is injected into a blast furnace to replace the more expensive hard coking coal.
According to Australia’s Commonwealth Bank, the spot price for premium metallurgical coal has spiked to nearly US $120 in the last quarter, nearly US$30 over the contract prices for the quarter.
This means the contract price of coal should jump for Q4.
The sudden price jump is attributed to two factors: flooding in Shanxi, China that damaged several roads, as well as other infrastructure issues, including several coal terminals in Australia down for repair. In Mozambique, coal shipments have been disrupted due to attacks by armed gunman.
All this, plus an increase in demand for steel is driving the prices upwards, though many industry analysts expect this growth spurt is temporary.
BUT WHO IS CONUMA COAL RESOURCES?
Conuma Coal Resources is an affiliate of ERP Compliant Fuels and the Virginia Conservation Legacy Fund. The Virginia Conservation Legacy Fund, ERP Complaint Fuels and their affiliates have purchased several distressed coal properties in the United States (US) from companies that have sought Chapter 11 bankruptcy protection over the last 10 months. However, the Canadian assets would be the group’s first international purchase.
Tom Clarke is best known as an environmentalist and founder of the Virginia Conservation Legacy Fund. Last year, he created ERP Compliant Fuels in order to purchase a pair of mines formerly owned by now-bankrupt Patriot Coal, as well as a stack of mining permits.
Then in December, a subsidiary of ERP, Seneca Coal Resource acquired Cliffs Natural Resources’, Pinnacle mine in West Virginia and Oak Grove mine in Alabama, also acquiring $268 million in liabilities as part of the deal.
Earlier this year, the company acquired the Gauley Eagle and Maple mines in West Virginia and the Walter Coke and Taft coal operations in Alabama from Walter Energy, Walter Canada’s former parent company for a dollar, assuming liabilities for that company.
The company is reclaiming some of the properties, but still operates four large mining complexes with about a billion dollars in assets and half a billion in profits, says Clarke. Not bad for a company that only started producing coal in October of last year.
To offset the carbon emissions from burning coal, the company is planting trees both on the mine property and elsewhere in Appalachia, selling the carbon credits alongside the coal, so when the coal arrives at the power plant, it arrives as a carbon neutral product.
“Right now, we’re offsetting ten percent of our impact,” says Clarke. “If we could offset 20, 30 or a hundred percent, we would.”
CAN YOU BE AN ENVIRONMENTALIST AND MINE COAL?
But what’s an environmentalist doing in the coal business? Clarke laughs. “There’s just as much coal being burned today as there was last year. It might be on the decline in Canada, in the US, but coal is expanding globally. You’re not going to convince people to burn more expensive fuel as they’re trying to build their economy. Our thesis is that if we can create a business model that shows you can offset the emissions, it will positively affect the industry. We decided to get right in the middle of it, make it cleaner.”
He laughs again. “Besides, Who is going to argue with planting trees?”
The move puts him at odds with other environmental groups that have been waging a legal and PR campaign to shut down coal. But coal isn’t going away anytime soon, and Clarke says by working within the system and using tree-planting to offset at least some of the coal emissions, he can help push the coal industry to be cleaner.
The company has made a pair of previous efforts to come into Canada, bidding on Stelco, a steel manufacturing company, now US Steel, in Hamilton, as well as making overtures for the Wabush Mines, an Iron Ore mine in Newfoundland earlier this year. If the deal does go through, this will be their first Canadian property.
WHAT IS FUTURE FOR WOLVERINE?
Clarke says the plan is to open Wolverine, sometime, though he is unwilling to give a timeline yet. Other sources report the plan is to open the mine in 2017, but this may be wishful thinking.
In its petition to the court, Walter Energy said hard coking coal prices would need to be in the $150 per tonne range before production at Wolverine and the Willow Creek Mine near Chetwynd would be profitable. While prices have bounced back in the last few months, they are still nowhere near that point.
Walter Energy purchased the three mines from Western Coal Corporation for $3.3 billion in 2011. In 2014, the company idled the mines., Walter Canada’s parent company, Walter Energy, declared bankruptcy and was sold to its creditors, operating under the title “Warrior Met Coal” in March of this year.
Reopening Brule would see about 200 people from the region go back to work. Clarke says, as a former union man himself, the company’s mission is to work with the local union to employ local workers. “We live in communities like Tumbler Ridge,” says Clarke. “Another whole part of what we’re doing is trying to create employment opportunities. When major employers goes out, we know what that can do to a community. We are trying to create income in the community.”
However, while the company is seeking to build relationships with the United Steelworkers, they are not taking on any responsibility for Walter’s responsibility to their workers. “Whatever Walter did is Walter’s problem,” says Clarke. “What we know is going forward. We want to have strong productive, relationships with our workers.”
The Wolverine Mine, formerly owned by Walter Energy, is being sold to Conuma Coal Resources.