One of the region's coal mines is closing next month, putting about 250 people out of work in the Chetwynd area.
The owner of the Willow Creek Mine, Walter Energy Inc. of Alabama, said they are not abandoning the mine but it is one of several in their operations where they are halting production. They blame global commodity prices, making it too expensive to dig the coal up and ship it to market for the money they would make in return.
"We greatly regret the impact this decision will have on many of our dedicated employees," said Walter Scheller, the company's CEO, noting 100 other employees of Willow Creek would continue to be employed at various other duties on behalf of the company. "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 [metallurgic] 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," he added. "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 CNBC.com, running Willow Creek was costing the American mining giant about $150 per tonne, while their other two mines in the same general region - Wolverine and Brule, both in the Chetwynd/Tumber Ridge region - were running at $120 and $130 per tonne respectively.
A difference of even $20 per tonne at those rates means - at the conservative levels of production at Willow Creek of about 900,000 tonnes per year - an extra $20 million in added costs.
According to Walter Energy's data, the price they got for their metallurgic coal (the kind most typically used in the production of steel) dropped 39 per cent in the last quarter of 2012 compared to that same time in 2011. That quarter's revenues therefore dropped from $703 million to $479 million. The company took a net-loss hit of $71 million in 2012's fourth quarter.
Without accounting adjustments, the company reported a 2012 net loss of more than $1 billion but with the adjustments, a small profit was made.
"Although there are clear signs of improving trends in global demand and pricing for met coal, our current outlook for 2013 remains cautious and we are focused on driving further efficiency in our business," Scheller said. "We currently expect sales and production of met coal in 2013 to be in line with 2012."
