Erdene and Xstrata still together
The companies planning to build the Donkin coal mine may be parting ways on the Cape Breton project but continue to work together hunting for minerals in Mongolia.
Xstrata Coal, which had been the operating partner in the Donkin coal deal, announced in April it would be selling its 75 per cent stake in Donkin and will be moving on to bigger projects.
While Erdene Resource Development Corp. of Dartmouth must have been disappointed to lose a partner the size and stature of Xstata, it still holds a 25 per cent position in Donkin and has been conciliatory in its reaction to Xstrata’s withdrawal from the project.
That may be because the companies continue to work together hunting for resources on the other side of the world.
Ken MacDonald, vice-president, business strategy, and CFO of Erdene in Dartmouth, told me that Donkin is unrelated to Erdene’s ongoing relationship with Xstrata Coal in the South Gobi Region of Mongolia.
Before announcing its exit from the Donkin project, word had gotten around that Xstrata was unofficially estimating a coal resource of almost 500 million tonnes for the Cape Breton mine.
Officially, in a document sent to the Canadian Environmental Assessment Agency, Xstrata indicated Donkin would have a lifespan of 30 years or more, and would extract about 2.75 million tonnes of washed coal per year, starting in 2014.
And yet the Donkin mine was still considered too small for a company the size of Xstrata.
MacDonald says he hasn’t heard how successful Xstrata has been in selling its stake in Donkin, but Erdene expects the sale will happen this year.
If everything goes as planned, the company that acquires Xstrata’s stake in the project will have underground coal mining experience, technical expertise and financial capability to operate the mine.
Under the joint-venture agreement, Xstrata Coal will fund the first $10 million of Erdene’s development funding requirement. Erdene says Xstrata “will bring forward up to $1 million of this to cover Erdene’s share of expenditure on the project during the sale process.”
Erdene, he says, is comforted by the fact it has a 60-day right of first refusal on any offer Xstrata receives, which may be used by the Nova Scotia company to increase its stake in the project.
The time line for the Donkin project has not changed for the environmental assessment process, engineering work and obtaining the necessary regulatory approval for the 2013 start of the underground exploration phase.
Meanwhile, the search for minerals in Mongolia has drawn interest from mining companies from around the world, including the junior mining company from Dartmouth.
Erdene is hunting for copper, molybdenum and coal, primarily in the South Gobi Region, which is within 300 kilometres of the Chinese border.
The Nova Scotia company controls 260,000 hectares in Mongolia where it is partnering with Xstrata Coal on the coal resource only. Erdene has estimated that it has minerals worth about $8 billion in the ground there.
Lately, the Mongolian government has been demanding a bigger stake in developing its resources but MacDonald says the tough talk about limiting foreign investment to 49 per cent has been part of the run-up to elections.
This is not the first time limits on foreign investment have been discussed, he says. Some companies have threatened to pull out of the country, and others have even stopped searching for resources in Mongolia, he says.
Now there appears to be a softening of the demands on the mining sector.
Erdene says independent technical consultants are creating a strategic mine-planning study and an environmental assessment study of its Zuun Mod molybdenum-copper project there.
And in Altan Nar, a 2,000-metre drill program was completed in April on the discovery zone of that gold and silver prospect.
(rtaylor@herald.ca)
Xstrata Coal, which had been the operating partner in the Donkin coal deal, announced in April it would be selling its 75 per cent stake in Donkin and will be moving on to bigger projects.
While Erdene Resource Development Corp. of Dartmouth must have been disappointed to lose a partner the size and stature of Xstata, it still holds a 25 per cent position in Donkin and has been conciliatory in its reaction to Xstrata’s withdrawal from the project.
That may be because the companies continue to work together hunting for resources on the other side of the world.
Ken MacDonald, vice-president, business strategy, and CFO of Erdene in Dartmouth, told me that Donkin is unrelated to Erdene’s ongoing relationship with Xstrata Coal in the South Gobi Region of Mongolia.
Before announcing its exit from the Donkin project, word had gotten around that Xstrata was unofficially estimating a coal resource of almost 500 million tonnes for the Cape Breton mine.
Officially, in a document sent to the Canadian Environmental Assessment Agency, Xstrata indicated Donkin would have a lifespan of 30 years or more, and would extract about 2.75 million tonnes of washed coal per year, starting in 2014.
And yet the Donkin mine was still considered too small for a company the size of Xstrata.
MacDonald says he hasn’t heard how successful Xstrata has been in selling its stake in Donkin, but Erdene expects the sale will happen this year.
If everything goes as planned, the company that acquires Xstrata’s stake in the project will have underground coal mining experience, technical expertise and financial capability to operate the mine.
Under the joint-venture agreement, Xstrata Coal will fund the first $10 million of Erdene’s development funding requirement. Erdene says Xstrata “will bring forward up to $1 million of this to cover Erdene’s share of expenditure on the project during the sale process.”
Erdene, he says, is comforted by the fact it has a 60-day right of first refusal on any offer Xstrata receives, which may be used by the Nova Scotia company to increase its stake in the project.
The time line for the Donkin project has not changed for the environmental assessment process, engineering work and obtaining the necessary regulatory approval for the 2013 start of the underground exploration phase.
Meanwhile, the search for minerals in Mongolia has drawn interest from mining companies from around the world, including the junior mining company from Dartmouth.
Erdene is hunting for copper, molybdenum and coal, primarily in the South Gobi Region, which is within 300 kilometres of the Chinese border.
The Nova Scotia company controls 260,000 hectares in Mongolia where it is partnering with Xstrata Coal on the coal resource only. Erdene has estimated that it has minerals worth about $8 billion in the ground there.
Lately, the Mongolian government has been demanding a bigger stake in developing its resources but MacDonald says the tough talk about limiting foreign investment to 49 per cent has been part of the run-up to elections.
This is not the first time limits on foreign investment have been discussed, he says. Some companies have threatened to pull out of the country, and others have even stopped searching for resources in Mongolia, he says.
Now there appears to be a softening of the demands on the mining sector.
Erdene says independent technical consultants are creating a strategic mine-planning study and an environmental assessment study of its Zuun Mod molybdenum-copper project there.
And in Altan Nar, a 2,000-metre drill program was completed in April on the discovery zone of that gold and silver prospect.
(rtaylor@herald.ca)
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