Fording Coal to push ahead with Cheviot mine plan

Fording Coal to push ahead with Cheviot mine plan

Planet Ark (Reuters)

March 18, 2004

Vancouver - Fording Canadian Coal Trust said this week it will push ahead with the controversial development of its Cheviot coal mine in Alberta because of rising coal demand. In a separate announcement, Fording warned that problems with rail service in Western Canada this winter will cut into its international sales volumes in the first and second quarters of this year.

The Calgary-based income trust said the Elk Valley Coal Partnership will proceed with development of the Cheviot Creek open pit mine at its Cardinal River Operation, and hopes to have it in production by the end of the fourth quarter.

The pit, near Hinton, Alberta, west of the capital Edmonton, is expected to initially produce 1.4 million tonnes of coal a year, but that could grow to 2.8 million tonnes in 2005 if there is enough demand.

Fording had shelved its development plans for Cheviot last year, citing a lack of adequate demand.

Elk Valley will apply to provincial officials for the needed licenses. It expects C$50 million ($37.6 million) in capital costs to begin initial production, and another C$70 million if production is expanded to the higher level.

The trust owns 65 percent of the Elk Valley Partnership that combined the production and export assets of Fording, Luscar Coal, Teck Cominco Ltd. Westshore and others.

Environmental groups have strongly opposed the Cheviot project and argue the mine, near Jasper National Park in the Rocky Mountains, is a threat to wildlife.

Fording also said on Tuesday that major rail delays had hampered Elk Valley's ability to get coal to port earlier this winter, and it expects sales in the first quarter to be only 5.5 million tonnes. Fording's Elk Valley unit primarily uses Canadian Pacific Railway but the railroad saw its mainline operations in British Columbia plagued by avalanches and other weather-related problems that repeatedly delayed trains.

The delays also forced Elk Valley to pay demurrage charges for ships waiting to be loaded, and a price increase expected to take effect in April for 2004 may have to be delayed until Fording completes shipments that were due under 2003 pricing.

The shipment situation has improved and Fording said it still expects to meet its sales expectations for 2004 of 25 million tonnes.