(EnergyAsia, August 8 2011, Monday) — Canada’s Fortune Minerals Limited said it has formed a 80/20 joint venture with a subsidiary of South Korean steel maker POSCO to develop the Mount Klappan anthracite metallurgical coal project in north-western British Columbia province.
Fortune Minerals, a London, Ontario-based diversified resource company with mineral deposits and exploration projects in Canada, said its wholly-owned subsidiary, Fortune Coal Limited, signed the joint-venture agreement with POSCO Canada Ltd (POSCAN) and its wholly-owned subsidiary, POSCO Klappan Coal Ltd.
In acquiring a 20% interest in Mount Klappan based on current capital cost estimates, POSCAN is expected to make total payments and cash contributions of C$181 million, including C$30 million in upfront funding upon closing. (US$1=C$0.98).
As manager of the operations, Fortune Minerals said it will contribute local development and operations expertise while POSCAN will provide international marketing services and financial backing.
Fortune Minerals said Mount Klappan holds one of world’s largest undeveloped deposits of metallurgical coal with measured reservesof 107.9 million tonnes, indicated reserves of 123 million tonnes, inferred reserves of 359.5 million tonnes and speculative reserves of 2.2 billion tonnes.
Covering 15,866 hectares of coal exploration licenses in north-western British Columbia, Mount Klappan is located 150 km northeast of the port of Stewart and 330 km northeast of the port of Prince Rupert.
The company said it has enlisted the support of Canadian National Railway to extend railway infrastructure to the mine site, providing a scalable transportation solution to Prince Rupert.
By using the port’s Ridley Terminals, the joint venture firm will greatly reduce shipping times to Asia, thus positioning Mount Klappan as a key supplier to the steel industry across the Pacific. The project is at an advanced stage of development, with C$86 million of work already competed.
Robin Goad, President and CEO of Fortune Minserals, said:
“We are extremely proud that Mount Klappan has attracted a world-class organisation like POSCO as a major investor and strategic partner. This transaction will allow for accelerated development of the Project and is anticipated to provide 100% of required funding to complete more detailed engineering and design studies as well as permitting and stakeholder consultations.
“ It is anticipated that Fortune will not be required to contribute any further funding until permitting is complete and prior to the commencement of construction. Additionally, our post-transaction levered after-tax NPV (8%) of Fortune’s 80% share of Mount Klappan is estimated at C$601 million at a C$175 per tonne PCI price, and represents only a fraction of the total resource.”
Yong Keun Kim, President of POSCAN, said:
“We are very pleased to invest in the Mount Klappan Project, which we see as one of the world’s premier coal development projects and a future key supplier of premium coal products to the global steel industry. This transaction expands our presence in North America, which already includes investments in the Mount Hope Molybdenum Project and Elk Valley Coal.”