by Greg Klein | May 5, 2015
In an effort to placate a native band, Fortune Minerals TSX:FT and POSCO Canada have sold their British Columbia coal licences to BC Rail, a provincially owned railway company without a railway. Announced May 5, the $18.3-million sale of 61 claims totalling 16,411 hectares in northwestern B.C. contains a 10-year buy-back option should the Tahltan First Nation agree to development of the Arctos anthracite project.
Calling the deal a good outcome in the current market, Fortune president/CEO Robin Goad said the joint venture “invested significant funds” to try to resolve the band’s concerns. “Mining is a cyclical industry and, considering the weak metallurgical coal prices at the present time, it was considered prudent to step back from Arctos and focus our efforts on our near-term production assets.”
A PwC report on B.C. mining, also released May 5, noted that steelmaking coal now trades around $100 per tonne, “a considerable drop from its record price around $330 in 2011.” The report quotes Don Lindsay of Teck Resources TSX:TCK.A and TCK.B saying prices can’t recover without further production cuts around the world.
Fortune and the South Korean steel producer subsidiary will divide the proceeds evenly, with Fortune allocating its share to working capital and debt repayment. The company operates the Revenue silver mine in Colorado and holds the proposed NICO gold-cobalt-bismuth-copper mine in the Northwest Territories, along with exploration projects in the NWT.
CN TSX:CNR took over BC Rail’s railway system in 2004 in a highly controversial $1-billion deal that the province insisted was a lease, not a sale. Once the deal was complete, the BC Liberal government acknowledged the lease would run for 990 years. Corruption allegations and a police raid on B.C.’s legislature followed. In 2010 the province paid $6 million in legal bills for two government aides who pleaded guilty to corruption-related charges.
Although BC Rail no longer has a railway to run, the government kept the Crown corporation intact with management, board of directors and staff responsible for maintenance of a 40-kilometre spur line and property sales.