Naomi Larsen, Chetwynd Echo Editor
CHETWYND – In a regulatory filing, Walter Energy announced Friday its intentions to shut down several of their coal mining operations including Willow Creek Mine located 45 km south of Chetwynd.
Willow Creek will cease operations in April.
“Over the past 18 months, since I became CEO, one of my key priorities has been aggressive operational management,” Walter J. Scheller III, Chief Executive Officer for Walter Energy said in a company statement Wednesday.
“While it is never easy to curtail operations at a facility, our commitment to idle operations where necessary is central to the Company’s operating plan. This plan has been developed with the full support of our Board.
“We greatly regret the impact this decision will have on many of our dedicated employees,” Scheller continued. “I would like to commend them for their work in significantly improving our productivity and costs at the mine over the past year.
“The current price environment for met coal dictated that we curtail production at Willow Creek in order to ensure we generate a sufficient economic return in mining the high quality met coal reserves at the site.
“Given the tremendous progress that has been made in the cost structure at the mine, when we see signs of sustainable market pricing conditions we would expect to ramp up production.”
According to a story by news agency Reuters, the mine is expensive to operate with a cost of $150 per tonne compared to other mines in the region where costs are $130 and $120 a tonne.
Raymond James analyst Jim Rollyson told Reuters that shutting down the Willow Creek mine in British Columbia is the right move.
“The market’s been tough for coal, and that’s one mine where they’ve been hemorrhaging cash, and they just closed up the wound,” he said.
Willow Creek’s production is split between hard coking coal and pulverized coal injection, which some steelmakers use in place of more expensive coking coal. It produced 868,000 tonnes of coal in 2012, according to regulatory filings, while the company as a whole produced 14.6 million tonnes.
The mine currently employs approximately 350 employees, of which approximately 250 will be affected by the decision to curtail production.
The Willow Creek mine will continue with limited operations to support Walter Energy’s Brule mine.
In an email to the Chetwynd Echo, Chetwynd Mayor Merlin Nichols said it’s disappointing when a community supporting business or industry closes.
“It’s not the kind of news we want to hear,” he said. “We think of the workers displaced and the loss of revenue to supporting businesses. It could be disheartening to dwell on these happenings.”
However, Nichols said, there is another side to this event that is a little brighter.
“The effects of the closure of Willow Creek could be more psychological than material,” he said. “Let me explain. As I understand the circumstances, only the pit is closing because of the deflated price of coal and the cost of mining at this time in this location. The equipment and the workers will be transferred to Walter’s operation at Brule. The load-out will continue to serve the Brule mine.”
Nichols said the closure of Willow Creek will not affect the recent efforts of the District to expand District boundaries to include the Willow Creek properties .
“We will continue with our discussions with Walter Energy and the Ministry to pursue our goals,” he said. “And finally, we hope that this closure is only temporary.”
In 2010, Western Coal (now Walter Energy) announced the early re-opening of the Willow Creek metallurgical and PCI coal mine that had been lying dormant since 2007.
At the time the end result was expected to be the annual production of 1.7 million tonnes of coal over a 13-year mine life.
Willow Creek is the fifth mine Walter Energy has announced plans to curtail or idle as part of its initiatives to address underperforming assets. Last week the Company said it was accelerating the closure of its North River underground mine in Alabama. In addition, the Company has also idled the Aberpergwm mine in South Wales and the Gauley Eagle underground and surface mines in West Virginia, and has curtailed production at its Maple underground mine, also in West Virginia.
As previously disclosed, the Company expects to record a one-time cash charge of approximately $7.5 million in severance costs in connection with its curtailing production of the Willow Creek operations. The Company currently expects that full year 2013 metallurgical coal production will be in line with production levels in 2012. Willow Creek’s General Manager Jeff Lowe did not return our calls.