[DONKIN, NS] — Xstrata Coal wants to sell its majority share in the Donkin coal project.
During a meeting at the Donkin fire hall to update the public on the project, Xstrata representative Val Istomin said the company is seeking to sell its 75 per cent stake in the project because it doesn’t fit the current business structure of streamlining operations.
“Instead of a single mine sitting around the place that we had 10 years ago, we’ve combined mines, two or three mines, they all go through one support structure,” said Istomin.
Istomin said Donkin doesn’t fit into that scenario because the Donkin tunnels give project partners access to the last bit of coal that is accessible from the land, which means they can never develop two or three more mines in the area.
Peter Akerley, president of Halifax-headquartered Erdene Resource Development Corp., which owns the remaining 25 per cent of Donkin share, said the company has been involved in the project far longer than Xstrata.
Over the last six years, Akerley said Erdene has invested approximately $25 million in the project.
“We see this actually as something positive at this point,” said Akerley. “Over the last number of years we recognize Xstrata has become a different company, one that wasn’t as focused on the Donkin project in going forward.”
Akerley said he believes there is an opportunity to employ local skilled tradespeople at the mine and for people working in Western Canada to return to Cape Breton.
“We have an opportunity now with a dredged harbour in Sydney, which is unique in the world,” said Akerley. “If you look around the world, coal operations find it difficult to get into a port. Here we have a unique opportunity, so we see nothing but positives in the Donkin project.”
Istomin said the sale process started Thursday, with Xstrata, Erdene and government expected to work together to find a suitable project partner.
Erdene has a 60-day right of first refusal.
As the sale process unfolds, Donkin project timelines are expected be maintained, including the completion of an environmental assessment that seeks to transport coal by barge to a transhipment site in Mira bay.
“It’s too bad that Xstrata didn’t latch on and see the opportunity of the dredging of Sydney harbour,” said Dist. 2 Coun. Kevin Saccary. “To have Xstrata come in and solely focus on barging was a severe disappointment.”
Saccary sent a message to Erdene that he’s not going to change his tune about the barging of coal, saying it’s too risky.
During recent meetings in Donkin, community leaders, residents and fishermen told Xstrata officials they want jobs but not the risks to fish habitat and coastal communities.
“We need to work together to get Nova Scotia Power to use our coal instead of importing coal from across the water,” said Cape Breton West MLA Alfie MacLeod. “I believe that by railing coal we can make a difference with Sydney harbour.”
Lindsay Peach of Port Caledonia said Xstrata’s plans no longer matter.
“The reality is a new operating partner might decide to do something totally different,” she said.
It’s estimated the Donkin mine will produce 2.75 million washed product tonnes per year and will directly employ about 300 people. The first production of coal is expected by mid-2014.
Project community liaison committee chair Hugh Kennedy said Xstrata’s decision to sell has nothing to do with the community’s concerns over barging.
“It’s just a business decision,” he said.
However, Round Island resident Jean MacQueen was upset by the announcement, saying she feels betrayed by Xstrata after being treated so well in the early development stages.
“Now they seem to have thrown us to the wolves completely,” said MacQueen.
Project officials have said the capital cost of barging coal is projected at $40 million, while the capital cost to ship coal by rail would be about $90 million.
The construction of the mine project is also expected to result in a loss of 4.6 hectares of surface seabed.