Western Canadian said the $C242 million capital cost is on budget, but cash on hand and cash flow from operations are not expected to cover the entire construction cost.
The company expects that project financing will be completed by late March or early April. The company said it had arranged a bridge loan from its major shareholder, Cambrian Mining, of up to $C30 million.
The company is constructing a coal preparation plant at Wolverine to handle three million tonnes of hard coking coal per annum. Initial throughput is expected to commence in July 2006 at the rate of 2.4Mtpa. The company expects a decision from the BC Government regarding increasing the allowable production at Wolverine from 1.6Mtpa to 2.4Mtpa.
Total capital costs on the Wolverine Project are estimated to be $242 million, including pre-production stripping costs and contingencies but excluding mining equipment. Pre-stripping is now underway by a contractor which has signed a four-year agreement, following which the company will assume the mining operations.
Western Canadian expects Wolverine to produce about 1.5Mt of hard coking coal during its fiscal year ended March 31, 2007.
During the quarter the company increased reserves of clean coal product by 70% to 27.7Mt of low ash hard coking coal.
The company reported a loss of $C383,000 for December quarter on sales of $C9.9 million. That compared with a year-earlier loss of $C5 million on no revenue.
Sales for the quarter were 82,979t of pulverized coal injection ("PCI") coal at an average price of $118.78 ($US101.73) per tonne. Cash costs for production were $70.95/t compared to $72.11 in the prior quarter.
The company mined 145,917t of PCI coal from the Dillon mine at the Burnt River property and realised FOB sales of 82,979t for total revenues of $9.9 million. Year to date the company mined 508,159t and sold 406,546t for total revenues of $48.5 million.
The company believes over the long term the market fundamentals for high quality low volatile PCI coals such as the Burnt River PCI will be sustained and the gap between low volatile PCI coals and premium hard coking coal will narrow.
“More mills such as those in South Korea and in Europe are increasing the ratio of PCI coals, which should improve demand and lead to prices more reflective of their value in reducing steel making input costs than their relationship with lower quality coals,” the company said.
