Work on a new underground metallurgical coal mine in Tumbler Ridge is underway, despite a global glut of steel-making coal that has resulted in B.C. coal mines being either idled or put on hold.
But that doesn't mean that 415 coal miners laid off from the Wolverine mine in Tumbler Ridge will find any immediate work at the new Murray River mine, because the skills of open pit miners are not directly transferable to long-wall underground mining, says HD Mining International Ltd.
Fifty-one Chinese miners are currently working at the mine, said Blair Lekstrom, a former Liberal MLA who is now acting as adviser to HD Mining chairman Penggui Yan.
The company has a "bulk sample" permit to mine 100,000 tonnes of metallurgical coal to test the deposit's quality.
If it proves to be high quality and economical to mine, the company plans to apply for a permit to build a new mine, and when that happens, Lekstrom said Canadians would be eligible for jobs there.
"If we make the decision to go to a full mine, we will be training Canadians to make sure that they're employed," he said.
But he added that, because of the perception that underground mining is dangerous, dirty work, he wonders if Canadians will be interested in careers underground.
British Columbians may well wonder why HD Mining is proceeding with its mine when other metallurgical coal mines in B.C. are being idled or put on hold.
In a conference call last week, Teck Resources (TSX:TCK.B) announced it was delaying a planned restart of the Quintette mine – idle since 2000 – and reducing its workforce by 5%, with most of the job cuts to come from the coal side of the company's business.
The news followed the previous week's announcement by Walter Energy Inc. (TSX: WLT) that 415 miners would be laid off from its Wolverine mine in Tumbler Ridge, and that 280 more would be laid off in July when it idles its Willow Creek mine in Chetwynd.
Metallurgical coal is B.C.'s second most valuable export commodity. According to BCStats, B.C. exported $4.8 billion worth of coal in 2013; lumber exports generated $5.3 billion.
Prices for metallurgical coal have fallen from about US$300 per tonne in 2011 to about US$100 per tonne. The demand for steel is down, and Australia has been ramping up its met coal production, creating a glut of cheap met coal.
Teck's gross profits for Q1 were $732 million, down from $994 million in Q1 2013, and Q1 shareholder profits were $105 million ($0.18 per share), down from $328 million ($0.56 per share) in 2013.
Analysts and industry insiders believe it's a cyclical dip that will recover.
"The world needs coal, and it needs met coal," Lekstrom said, "and we're optimistic that, although we're seeing a bit of a lull in the pricing right now, we do think that it will recover."
Ann Marie Hann, president of the Coal Association of Canada, agreed.
"The long-term prospects for coal – both steel-making and thermal coal – globally are very, very strong in the mid- to long-term."
As for HD Mining's plans to mine for met coal when the market for it is depressed, that's not unusual, said B.C. Energy and Mines Minister Bill Bennett.
As for the bad optics of hiring Chinese miners when B.C. coal miners are being laid off, Bennett said HD Mining is permitted to take only a bulk sample of coal from the ground to see if it is economically feasible to build a new underground mine. There are agreements in place to train Canadians, should a full mine go into operation. "We could go and train 300 or 400 workers to do long-wall mining, they could take the bulk sample, decide the coal quality's not high enough and the mine never gets built," Bennett said. "That doesn't make a lot of sense."
