Deal signed for Nova Scotia’s Donkin Coal mine

Morien Resources Corp. and Glencore have signed a deal for the sale of Glencore’s interest in the Donkin Coal mine on Cape Breton Island, N.S., which involves the development of one of the largest undeveloped coal deposits in North America.

"We believe the mine is an attractive prospect for Nova Scotia and once opened, could provide significant economic benefits for Cape Breton and Nova Scotia," said Natural Resources Minister Zach Churchill in a press release.

An arms-length third party has agreed to terms with Glencore for the purchase of the entirety of Glencore’s 75 per cent interest in the Donkin Coal Project, including all property, rights, entitlements and undertakings of Glencore.

Pursuant to the Donkin joint venture agreement between Glencore and Morien, Glencore has now offered to sell the purchased assets to Morien, at the same price and on the same terms and conditions as agreed with the third party.

If Morien does not act on the Right of First Refusal within a 60 day period, Glencore will be entitled to complete the sale of the purchased assets to the third party. In accordance with the Donkin Joint Venture Agreement, the terms and conditions of this offer may not be disclosed to any third party.

Morien is now reviewing the terms agreed to between Glencore and the third party and will decide in due course whether it wishes to exercise the Right of First Refusal.

For production to begin, water must be pumped out of the mine and infrastructure has to be built on the site.

The Nova Scotia Transportation and Infrastructure Renewal Ministry would be responsible for any provincial road improvements needed to access the mine.

The government will carry out a due diligence process, before work can begin, to ensure the new owner has a sound plan that emphasizes worker safety, the technical ability to operate a mine of this scale, and adequate financing to develop the project.

For this reason, it may be several years before the Donkin mine could be in full production.

The Department of Environment approved the Donkin Export Coking Coal Project in July 2013, following an environmental assessment.

According to the environmental impact statement prepared by Stantec Inc., the project involves a proposal to construct and operate an underground coal mine facility at the site of the existing Donkin Mine located on the Donkin Peninsula in Cape Breton Regional Municipality.

The Sydney coal basin is located along the northeastern coastline of Cape Breton Island, mostly offshore, under the Atlantic Ocean.

The project will produce about 3.6 The coal will be primarily suitable for coking coal markets, but may also supply thermal coal markets.

The project involves the construction of underground and surface infrastructure, which includes a coal handling and processing plant capable of processing 3.6 million tonnes per annum (Mtpa) of coal. This will be subsequently washed to provide about 2.75 Mtpa of product coal.

Construction includes a marine barge load-out facility and a 25 km long 138 kV transmission line within existing rights-of-way from Victoria Junction to Donkin Mine. There will also be a trucking haul route for domestic customers, which will be used when marine transportation is considered to be impractical.

There are currently two surface portals to the existing two subsea tunnels which extend about 3.6 km from the Donkin Peninsula to intersect with the Harbour Seam.

The previous owners of the mine sealed the tunnels in 1992 and the tunnels were allowed to fill with water (from groundwater intrusion). However, water has been removed from the tunnels as part of the ongoing care and maintenance activities of the mine.

To ensure adequate mine ventilation a third mine access tunnel will be required as the mine is being developed. The tunnel be about 7.6 metres in diameter and 3.6-km long, which will result in about 200,000 m3 of in situ rock being excavated.

It is likely that construction would be carried out using a tunnel boring technique similar to that used for the majority of developing the existing tunnels.

Nova Scotia can expect an overall total (direct and spinoff) of 8,497 person-years of employment in the first five years in the development phase. The project’s contribution to the Gross Domestic Product (GDP) for the province will be $483 million during the development phase.

During the first five years of Project development the Project is expected to generate approximately 5,430 person-years of employment (direct and spinoff) sourced within Cape Breton.

Income to Cape Breton is predicted to be in the range of $226 million during the first five years.

Morien is a non-operating royalty and minority interest investment company, which currently holds a 25 per cent minority interest in the Donkin Coal Project.

About $43 million has been invested in the Donkin Coal Project since 2006, including $15 million by Morien.

Coal has been mined in the Donkin region since the early 1860s.

Follow Richard Gilbert on Twitter @buildingcanada.