Fortune Minerals has inked an $181-million deal with Korean steel-making giant POSCO to advance the Mount Klappan coal project in an area in northern B.C. which some First Nation members and environmental groups want to see preserved.
POSCO Canada Ltd., a subsidiary of the Korean giant steelmaker, will take a 20 per stake in the joint venture to build the estimated $768-million coal mine, located 550 kilometres northwest of Prince George. Although the mine is distant from Prince George, the largest city in northern B.C., mining projects are expected to have benefits as the city is considered a service and supply centre for the mining sector. Equipment firms like Finning in Prince George are already servicing the coal sector in northeast B.C.
POSCO must put up $30 million immediately and will make payments to the Mount Klappan project as it is developed.
Mount Klappan in northwest B.C. is one of the largest undeveloped metallurgical coal deposits in the world with measured coal resources of 108 million tonnes. The project has nearly another 500 million tonnes in indicated and inferred coal resources, says the company.
"We are extremely proud that Mount Klappan has attracted a world-class organization like POSCO as a major investor and strategic partner," Fortune Minerals president and CEO Robin Goad said in a statement.
Goad said the deal is expected to accelerate development of the project.
POSCO Canada president Yong Keun Kim said the company views Mount Klappan as one of the world's premier coal development projects and a future key supplier of coal to the global steel industry. Metallurgical coal is a key ingredient in steel making, providing heat but also carbon as an ingredient.
"This transaction expands our presence in North America, which already includes investments in the Mount Hope molybdenum project and Elk Valley Coal," Kim said in a statement.
The project remains in the pre-application stage of its environmental review process, and faces opposition from some First Nations members and environmental groups such as Forest Ethics.
The Mount Klappan project is located in the so-called sacred headwaters - the source of the Skeena, Nass and Stikine rivers - an area that some First Nation members do not want to see developed.
In 2005, 13 aboriginal elders and children were arrested by RCMP in a blockade of an access road to the Klappan Mountain area. Protesters included a group called the Klabona Keepers.
However, in 2009, Fortune Minerals signed an agreement on co-operation and mutual respect with the Tahltan Central Council.
Protest also expanded to include Shell's plan to drill for coalbed gas in the region. Several environmental groups are fighting to preserve the area. Forest Ethics representative Karen Tam Wu said the Mount Klappan coal project remains a concern.
Fortune Minerals released an updated feasibility study eight months ago, showing the project has robust economics using a new rail-hauling strategy.
The plan is to lay track on an already-constructed 150-kilometre right away to the mine site. The estimate $318-million price tag of the rail line is 40 per cent of the mine project's cost.
Fortune owns more than 15,000 hectares of contiguous coal licenses. These licenses straddle the B.C. railway right-of-way and roadbed, which provides road access to the site from Highway 37.
Construction of a $404-million power line is expected to get underway this year along the Highway 37 corridor.
