Written by GORDON HOEKSTRA
Citizen staff
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Wednesday, 26 November 2008 |
Western Canadian Coal Corp. will be temporarily suspending operations at its recently started Willow Creek mine at the end of the month because global economic uncertainty is impacting the demand for metallurgical coal.
The company is also stopping any further spending on the mine. Western Canadian Coal has spent $40 million and would need at least another $60 million to complete work at the mine.
Future decisions on restarting mining operations and expansion plans at the mine and plant will resume once clarity on next year's coal prices and commitments become more visible, said the company.
"Other than capital spending required to sustain operations at our Wolverine and Brule mines, we have begun a plan to suspend all capital expenditures," said Western Canadian Coal president and CEO John Hogg. "We are also reviewing all non-discretionary spending to contain our mining cash costs."
The company's operations are located in the Chetwynd and Tumbler Ridge area, about 200 kilometres north of Prince George, which is a supply and service centre for the mining sector in northern B.C.
About 85 jobs will be lost at the Willow Creek mine, a 12-per-cent reduction in Western Canadian Coal's workforce of 705, about 20 per cent of who work directly for the company and the other 80 per cent for a mining contractor.
Western Canadian Coal just received an environmental certificate for its $55-million Hermann mine, which is part of the company's Wolverine project.
Western Canadian Coal -- which also operates the Brule mine -- has plans to expand coal production to seven million tonnes a year by 2012. The company continues to push forward those expansion plans. The only thing that has changed is the timing, said company official David Jan.
Coal prices are expected to fall when a new one-year contract begins in April, but it's not known by how much, said Jan. That uncertainty means it is prudent to pull in all but necessary spending, he said.
The company has been riding high coal prices to a solid financial performance this year.
The company posted record sales and profits of $44.7 million in the three months ending in September. In the first six months of its fiscal year, which begins in April, the company has had a profit of $104.5 million.
Jan pointed out that the company has no bank debt and is expected to be in a strong cash position by the end of its fiscal year in March. That will give the company flexibility to determine its future growth plans, one silver lining to the challenges, he said.
Western Coal started work in the Tumbler Ridge area five years ago in an effort to tap into a surge in world coal demand by taking advantage of already-proven coal resources in northeastern B.C., as well as using excess railway and port capacity at Prince Rupert. All the coal travels through Prince George.
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Last Updated ( Wednesday, 26 November 2008 )
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