Consol Energy in conditional sale of its Grassy Mountain lands north of Blairmore
JOHN PUNDYK
Feature Columnist
It is always good to start the New Year with a positive story on the local economy. As I sat collecting my thoughts, I asked my youngest daughter, who happened to be sitting right in front of me, what she thought the “economy” was. Without flinching, my seventh grader replied, “The economy deals with the basic needs of people.”
Thinking back, I struggled to remember any of my old professors at university being so clear on this subject. I guess, as we grow older, we tend to complicate things a bit. Give us an academic degree or two and this can really inspire us to muddy any topic even further.
When it comes to the Crowsnest Pass and the Elk Valley economy, nothing provides as much for our “basic needs” as the coal business and this business seems to be heating up.
On January 3, while reading the day’s business news, a headline caught my eye stating “Consol Energy sells coal assets in Canada.” Knowing Consol owns a large swath of land directly north of Blairmore, I went directly to the story.
The first part of the story dealt with a $105 million sale in the Ram river area north of Calgary along the eastern slopes. The properties are known as Ram River and Scurry Ram and figure prominently in Alberta’s geological history.
The purchasers, Forbes and Manhattan Inc. from Toronto, formed a company called Ram River Coal Corp. to acquire this coal property and the transaction took place on December 21, 2012. Forbes and Manhattan, a Canadian company, has also been in the news recently because of their operations and purchases of coal assets in South Africa.
Closer to home, and directly north of Blairmore, sits a large coal deposit which many of us know as Grassy Mountain. Grassy Mountain was an open pit mine long before such mines became the industry norm where possible.
I remember, many years ago, riding a dirt bike to the top of that mountain and marvelling at a site that looked as if the operations were just in shut down and everybody would be back to work the next day. There was even an old warm-up shack at the top of the pit with some newspapers and odds and ends the miners had left behind when they vacated the site. In talking with a few old timers, there is still a lot of good coal in that area.
A January 3, 2013 Consol Energy press release states that on December 20, 2012, the Company entered into a conditional sale agreement of the Grassy Mountain property with an Australian based coal exploration company named Riversdale Resources.
Further, since this sale is “subject to certain conditions, CONSOL anticipates closing this transaction during the second quarter of 2013.” In transactions of this nature, due diligence is often a lengthy process and this type of delay is to be expected.
Those of us who follow coal news will recognize the name Riversdale Resources has some, if in name only, familiarity with another strong coal mining company which became quite famous in 2011. That company was Riversdale Mining Limited (RML) which was formed in Australia in 2004 and began trading on the Australian Stock Exchange (ASX) in that year.
Chaired by Michael O’Keeffe, the company started with a modest Anthracite Colliery in South Africa and in seven short years, through a series of sharp acquisitions, acquired one the largest high quality coking coal deposits in the world in Mozambique, Africa. The operation in Mozambique became known as the Benga and Zambeze Projects and as RML continued to bring the mine into operation, global mining heavy weights started to take notice.
As development of the coal deposits in Mozambique progressed, RML brought on board some very powerful investors, such as Tata Steel of India, and Wuhan Iron and Steel Corporation from China, as well as others.
Rio Tinto, the world’s third largest diversified mining company, began acquiring a stake in RML and by June, 2011, the company was in a majority position to force the compulsory sale of RML to Rio Tinto itself.
The 2011 purchase of the Riverdale Mining Limited by Rio Tinto was valued at about $4 billion Australian Dollars, which today trade above par the Canadian Dollar.
Speaking about Benga and Zambeze coal deposits in 2011, Jan du Plessis, the chair of Rio Tinto, compared the find to Australia’s Bowden Basin in Queensland which “contains Australia’s largest coal reserves, [where] more than 100 million tons of mainly export coal [is] being extracted annually.”
Fresh from their sale of Riversdale Mining Limited to Rio Tinto, the principals behind RML, Michael O’Keefe and Steve Mallyon, started a private company based in Australia, called Riversdale Resources.
It is worth noting, that Riversdale Resources has no connection to Rio Tinto or to Riversdale Mining Limited. This point becomes important when sifting through information on the Internet, where lots of material gets condensed into short articles, and confusion becomes very easy.
In August 2012, The Canadian Business Journal (CBJ) did an excellent profile on Riversdale Resources. Since its formation, the company won a bid for a coal property in Alaska, known as Chickaloon. A presentation package prepared by Riversdale Resources and available on the Internet, states the area has a long history of coal mining and there is a known presence of hard coking coal.
The company that now has signed leases in place, has begun resource evaluation and is engaged in the regulatory process. The attraction of the Alaskan lease is not only the possibility of high quality coal, but also its proximity to a good transportation infrastructure.
In the CBJ article, the author quotes Steve Mallyon in reference to the Chickaloon property: “The Riversdale model has not changed, we are not really a greenfield explorer, we go into known coal domains with good quality coal, but the difference here is that we were sensitive about access to related infrastructure.”
This business model makes a lot of sense when thinking about the Crowsnest Pass. I remember saying in a story, maybe a year or two ago, that there was a time in our history when the communities of the Crowsnest Pass were as important economically to Western Canada as Fort McMurray is today.
In the Crowsnest Pass, coal mining has always been the best provider for all our basic needs. With the rise of China and India, as well as the increasing industrialization and urbanization of the rest of the world, the global demand for metallurgical coal will keep rising for the foreseeable future. With this rising demand for coal, and the abundance of the resource around us, there is no reason why the Crowsnest Pass should not, once again, be an economic net benefactor to the provincial treasury.
While the sale of the CONSOL ENERGY land, north of Blairmore, is still only conditional and there are many technical and regulatory hurdles ahead, the Riversdale Resources team behind the project inspires confidence not only because of their past development record, but also because of their obvious access to global capital markets. If the project were to become a reality sometime in the future, it would be important, not only to the Crowsnest Pass itself, but would also serve to kick start the southern Alberta economic engine.
At a time when low prices in natural gas and discounts in heavy oil are sending our provincial treasury into deficit and threatening funding for health care, education and basic infrastructure, it makes sense to develop other resources, such as export coal. This would add to our tax base and protect the high level of provincial and municipal services to which we have all became so accustomed.