Glencore Xstrata blocking progress at Donkin coal mine – by Roger Taylor (Halifax Chronicle Herald – March 31, 2014)

In hindsight it may have been a mistake for the Nova Scotia government to allow mining giant Xstrata plc to win control of the mothballed Donkin coal mine.

It seemed like a good idea at the time to have a company of the stature of Xstrata, with the know-how and financial backing to get the job done, to take over management of the underground mine.

But now, after several years of waiting, the market for coal has changed and so has the makeup of Xstrata, which was acquired by a major competitor, Glencore, in 2012. It didn’t take long for the new company, Glencore Xstrata plc, to realize the Donkin mine was too small for a corporation of its scale and that the return on investment couldn’t possibly meet its expectations.

So Glencore Xstrata announced it would instead sell its 75 per cent stake. But until a buyer could be found it would lay off the few workers looking after the site and would allow the mine to flood.

Although Glencore considers the Cape Breton project small, its 25 per cent minority partner in the Donkin mine, Morien Resources Corp. of Dartmouth, believes the development of the mine is still a winning proposition.

Back when the federal government’s Cape Breton Development Corp. was still operating coal mines on the island, it put out a report suggesting there were 1.9 billion tonnes of coal in the Donkin resource block. Xstrata took a much more conservative view of the mineable resource, but even so the estimate was almost 500 million tonnes.

Over the years Morien, and its predecessor company Erdene Resources, has steadfastly maintained that Donkin has very high–quality coking and thermal coal, and the mine’s proximity to deep water makes it a unique business opportunity on a global scale.

Morien officials are still hopeful Donkin could be put into production. In earlier interviews with company officials, I was told they estimate Donkin could have an annual output of about 2.75 million tonnes of coal, with potential for more.

For the rest of this article, click here:

Comments are closed.