The Raven coal project on Vancouver Island is a study in the hurdles a mining company has to clear before it can even sink a shovel into the ground.
The project, which Vancouver-based Compliance Energy Corp. (TSX-V:CEC) has proposed, would produce 830,000 tonnes of steel-making coal annually if built.
But the firm has to negotiate through a racecourse of social and regulatory barricades before construction can begin, not the least of which includes opposition from the local shellfish industry, the aptly named citizens group CoalWatch and a plethora of transportation and infrastructure issues.
Add to that a complex permitting process and the estimated $272 million needed to build Raven and even the most bullish investors might think twice about the project.
But Compliance isn’t phased. It says Raven would create more than 300 well-paying jobs for a part of the Island that’s been hit hard by the forestry industry downturn.
“It’s an area of high unemployment right now,” said Jim Defer, Compliance’s CFO. “The forestry industry is still going through a massive downturn and everyone there is [saying], ‘Please bring us a new project so we have more business in town.’”
Located south of Comox, Raven would be the first underground coal mine in its area, but follows a rich history of coal production on Vancouver Island that includes the still-producing Quinsam coal mine 60 kilometres to the north.
Compliance acquired Raven in 2008 via a deal with West Fraser Timber Co. Ltd. (TSX:WFT), which had rights to the land, and joint venture partners Itochu Corp. and LG International Corp.
Defer said the joint venture agreement means Itochu and LG will help Compliance raise the appropriate debt package to finance the project.
That, for the most part, takes care of the money issue, although Compliance’s cash flow decreased 55% to $2.1 million in the year between June 2009 and June 2010.
More troubling is the opposition the company has received from Island residents.
The BC Shellfish Growers Association, which claims to contribute $151.1 million to the local economy, has openly opposed Raven.
The association believes toxic water from the mine could drain into nearby Fanny Bay and devastate shellfish farms.
“You can mine for coal all over this world, but you can only grow shellfish in very few places and we happen to have one of those places,” said John Snyder, president of CoalWatch Comox Valley.
In an interview, Snyder, a retired Fanny Bay resident, said he’s concerned about what impacts Raven could have on local aquifers, adding that many Fanny Bay residents draw their water from wells.
CoalWatch wants the company to provide a full map of aquifers in the area, and Snyder said he also wants the project to be subject to a federal environmental review panel hearing, similar to Taseko Mines Ltd.’s (TSX:TKO) Prosperity project near Williams Lake.
Raven is subject to both a provincial and federal environmental review, but the processes are somewhat harmonized, meaning the federal review might not be as comprehensive as the provincial review.
Defer said Compliance is trying to make the mine as environmentally friendly as possible.
The company has included a $24.3 million capital expenditure for a water treatment facility, though that is subject to change.
Compliance has also decided Raven would be an underground mine in part to limit surface disturbance but also because of its geologic characteristics.
Yet the most contentious issue might be transportation.
Compliance’s capital expenditure plan includes a $58.8 million charge for a new port facility in Port Alberni, from where the company could ship its coal to Asian markets.
That means approximately 70 dump trucks a day would haul coal from Raven down the narrow, windy highway to Port Alberni.
“That road, especially in the summer with tourist traffic and in the winter time when the conditions are poor, is already a bottleneck,” said Port Alberni city manager Ken Watson.
He added that a residential neighbourhood sits above the port facility and, as such, the company has decided to put a roof on the coal loader to appease residents – a first for B.C. Watson said the city would rather have the coal shipped via train to the port, but current rail infrastructure couldn’t support it.
Still, Raven could be a significant economic injection for Port Alberni, Watson said, generating jobs and tax dollars for a community that’s struggling (see “Industrial tax cuts threaten to squeeze municipal services in small-town B.C.” – issue 1067, April 6-12).
Vancouver
CEO: John Tapics
Employees: N/A
Market cap: $15.7m
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EPS: $(0.14)
Sources: Stockwatch, TSX