Temporary layoffs for 415 people at Wolverine and 280 employees at Brazion effective immediately.

Mike Carter, Chetwynd Echo

CHETWYND – Walter Energy announced on Tuesday April 15, that it would begin the process of “idling” its Canadian operations this month, including the Wolverine and Brazion coal mines outside of Chetwynd and Tumbler Ridge.

This included the Wolverine mine located 15 km outside of Tumbler Ridge, the Willow Creek Mine, which is about 45 km west of Chetwynd, and the Brule mine, which is about 45 km south of Chetwynd.

Wolverine will be the first to close, effective immediately, commencing what the company terms “temporary layoffs” of approximately 415 employees at the mine, and about 280 employees at Brazion, and other administrative support staff.

Severance packages will be available to most employees, the company says.

Walter Energy expects to incur severance charges of approximately $7 million in the second quarter of 2014 in connection with the idling of the mines.

Brazion, which includes the operations of Brule and Willow Creek near Chetwynd, will continue to operate the Brule mine, but expects to idle the mine by July 2014.

Walter Energy says it will continue to operate its preparation plants at these mines to complete processing of coal that already has been mined and is in inventory.

As of December 31, 2013, Walter Energy had about 1.1 million metric tonnes of coal in inventory in Canada.

“These layoffs are particularly unfortunate because our employees have worked very hard to keep these mines competitive in the face of daunting market conditions,” Walter J. Scehller III, Chief Executive Officer said. “Equally important, they’ve worked safely.”

Scheller noted that the Brule mine completed 2013 without a reportable safety incident.

The company still views the coal reserves as valuable assets, and for the time being, are not planning on selling or ceasing ownership all together.

Walter Energy’s careful description of the process as “idling” the mine properties, is meant to reflect the company’s goal to wait out the current market conditions until they can get the best value out of the reserves,

A limited number of employees will remain at each site to operate the preparation plants and, once coal processing is complete, to perform ongoing equipment maintenance and provide ongoing security for the sites during the idle period.

As the Chetwynd Echo first reported in January 2014, investors have been continually growing weary of Walter Energy stock as the price of metallurgical coal continued to decline.

A weak met coal market forced the Willow Creek mine to curtail its operations in March 2013. The cuts came because the cost of producing a tonne of coal at the mine had come too close to the selling price per tonne, meaning it was no longer profitable.

Once employing up to 300 people, Willow Creek now gives work to about 80, with 40 in the pit and 40 in the wash plant, preparing coal produced at the nearby Brule mine.

More bad news came in January, when Moody’s Investors Service downgraded Walter Energy deeper into “junk” territory.

The writing for Brule and Wolverine appeared to be on the wall, and with this week’s announcement, confirmed what many have been expecting for months.

For 2013, coal production from Wolverine, which produces mid-volatile hard coking coal, was 1.6 million metric tonnes, while the Brazion mines produced about 1.9 million metric tonnes of low-volatile PCI and 0.1 million metric tonnes of hard coking coal.