RE: PNV-10 Calculations
David Finlayson,The Edmonton Journal
Published: Saturday, February 09
EDMONTON - A surge in global demand for coking coal has ignited prices and mining company stock, including Grande Cache Coal.
Sharesin GCC have almost doubled in value since Monday to $3.38, and otherWestern Canadian producers also experienced increases following rumoursthat an Asia steel company had paid $275 U.S. a tonne for hard cokingcoal, more than double last year's price.
Hard coking coal isturned into coke by integrated steel mills, which account for about twothirds of worldwide steel production.
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A power shovel loads a coal-hauling truck at Grande Cache Coal's open pit mine.
Chris Schwarz, The Journal, File
Floodsin Australia have squeezed an already-tight market and increased thedemand for Western Canadian coal, which can be shipped relativelyinexpensively through Vancouver or Prince Rupert. GCC is selling all itcan produce at last year's mid to high $90s per tonne price, and CEORobert Stan said he'd heard that a contract had recently been signedfor 300,000 tonnes at $275 US a tonne.
"I think this year's prices could well double, although we haven't yet had a benchmark settlement we could point to."
Coalcontracts are negotiated annually in early spring and Stan said GCCneeds a big increase over last year when it took a kicking from thehigh Canadian dollar.
"A price of $150-$200 a tonne would be great for us."
Thisweek the company reported a third quarter loss of $3.4 million, or fivecents a share, compared to a loss of $2.2 million, four cents a sharelast year. Analysts were forecasting as much as an 11 cents a shareloss.
Many analysts are building a doubling of coal prices intotheir forecasts, and Chinese domestic spot prices have hit $194 US forFebruary delivery. In its newsletter this week, Canaccord Capitalcalled the $275 a tonne figure "a real mind-blower."
"With allthe Australia supply issues that have come to light, needless to sayCanadian coal assets have become very strategic to any one of a numberof Indian and Chinese interests."
GCC only produces one per centof the world's coking coal, but Stan said they plan to increaseproduction from about 1.6 million tonnes in the current fiscal year toclose to two million next year.
In the last 18 months the companyhas moved from using contractors to buying its own equipment and hiringits own people. The last long-term contractor will be out of theoperation by summer, and Stan said costs are down to a manageable level.
"Wewere at a point where we had to make some major changes, and like a lotof companies it was a painful operation trying to find people andequipment."
"We're at the stage now where we have sufficient people -- 300 by the end of March -- for a period of time."
Theybrought in some underground miners from South Africa last year, and adozen more are coming this year. They also had some success at a recentrecruiting drive in Nova Scotia's Cape Breton area, Stan said.
Anyincrease in coal prices is good news for the town of Grande Cache,which has been on a boom and bust roller-coaster ride since the minewas developed in 1969. It changed hands several times before finallyclosing in early 2000. GCC acquired some of the leases later that year,and started developing a new underground mine.