Well positioned and growing

Teck Cominco’s connections to coal mining go back a long way. They began with Cominco holding a 41% interest in Fording Coal, which began mining coal at the Fording River Operations in 1971. The company’s other predecessor, Teck Corp., made its entry into the coal business with the construction of the Bullmoose mine in the early 1980s. Teck Cominco became the managing partner of the Elk Valley Coal Partnership when it was created in 2003.

Elk Valley Coal, which operates five open pit mines in British Columbia and one in Alberta, is owned 40% by Teck Cominco and 60% by Fording Canadian Coal Trust. The partnership consolidated western Canada’s metallurgical coal mines previously owned by Fording, Teck Cominco, and Consol Energy and Luscar Energy Partnership. Elk Valley now ranks as North America’s leading producer of hard coking coal.

Together, Teck Cominco and Fording are reaping large rewards from their partnership. Elk Valley Coal produced 25.7 million tonnes of clean coal in 2005 with sales of 24.1 million tonnes. Total revenue was $3.0 billion in 2005 of which $1.2 billion contributed to Teck Cominco’s healthy bottom line. This year’s coal sales are estimated to be between 22.0 million and 25.0 million tonnes, depending on demand from the steel industry.

Fording River

Coal mining in the Elk Valley began in the 1890s to fuel locomotives on the recently completed railway. It wasn’t until 1971, however, that the Fording River Mine, located 29 km northeast of Elkford, B.C., was put into production. Now after 35 years of mining, Fording River has clean coal reserves of 239.0 million tonnes.

The wash plant employs heavy media tromp baths, heavy media cyclones, water-only cyclones, spirals and flotation. The coal is dried and stored before shipment via rail to the Port of Vancouver, Thunder Bay Terminals in Ontario or directly to customers in North America. Interestingly, coal shipped west to the Port of Vancouver by Elk Valley makes up 30% of all bulk goods shipped through that port.

Greenhills

The Greenhills mine, 8 km northeast of Elkford, was opened in 1981 by Westar and a Korean steel company. Fording Coal purchased Westar’s 80% interest in 1992, and that share became part of Elk Valley Coal. Pohang Steel Canada continues to hold the remaining 20%. Production at Greenhills has expanded since 1992 to 5.3 million tonnes/year. The mine expects another 18 years of operation based on 100.0 million tonnes of clean coal reserves.

This is Elk Valley’s only non-unionized mine, and it is the partnership’s most productive in terms of total material moved (coal and waste).

Currently, the Cougar North pit is being mined by truck-and-shovel methods. The nearby Cougar South pit is under development to replace the Cougar North pit when it is mined out.

The Greenhills wash plant uses heavy media cyclones, water-only cyclones and froth flotation to produce clean coal. It has a name-plate capacity of 5.0 million tonnes annually. The coal is dried, stored and shipped via rail to customers.

Line Creek

Crows Nest Resources, a subsidiary of Shell Canada, opened the Line Creek mine 27 km north of Sparwood, B.C., in 1981. Ownership changed several times until it was acquired by Elk Valley Coal. The turnaround from being one of the poorest performers in the Elk Valley portfolio to a solid one is a significant accomplishment. This year it will produce 2.5 million tonnes of clean coal, and with a reserve of 14.0 million tonnes of metallurgical coal and 3.0 million tonnes of thermal coal, it has sufficient reserves for eight years of operation. Exploration programs are well underway to delineate new reserves that are expected to prolong the mine’s life.

The wash plant employs heavy media separation, screening, cycloning and flotation. Separate facilities can produce 2.0 million tonnes of metallurgical and 0.5 million tonnes of thermal coal annually. The clean coal is dried, stored in separate silos, and loaded on trains for transport to customers.

Elkview

In 1969 Kaiser Resources opened the Balmer pit and underground mine 15 km from Sparwood. The mine’s ownership changed over the years until low coal prices forced its closure in 1992. The pit was reopened the next year by Teck and rechristened the Elkview Mine, which became part of Elk Valley Coal in 2003. In August 2005 the operation became the Elkview Mine Limited Partnership when subsidiaries of Nippon Steel and Posco agreed to invest US$25 million to earn a 2.5% share of the mine. The money will be used to expand output to 6.5 million tonnes this year and again to 7.0 million tonnes in 2007. Elkview has at least 35 more productive years ahead of it based on clean coal reserves of 246 million tonnes.

Coal Mountain

The Coal Mountain mine, located between Sparwood and Crows Nest Pass, is the smallest and most southerly of Elk Valley’s mines in British Columbia. The mining history at Coal Mountain goes as far back as 1905, but it wasn’t until the 1940s that large-scale, modern open pit mining began. Fording Coal acquired the property in 1995 and contributed the mine to Elk Valley Coal in 2003.

Thanks in part to a low strip ratio (only 5.0 m3 of waste to 1.0 tonne of clean coal) this is Elk Valley Coal’s most productive mine in terms of clean coal produced. The mine can produce 2.7 million tonnes of clean coal annually. Reserves are pegged at 26 million tonnes, ensuring about 10 more years of production.

Cardinal River

Elk Valley Coal’s newest mine, 42 km south of Hinton, Alta., is part of the Cardinal River Coals operation, a wholly owned subsidiary. Coal was discovered in the area as early as 1908, and the first mine was built by 1911. The Luscar deposit was mined underground from 1921 to 1956, then reopened as an open pit in 1970. But today it is closed and being reclaimed, replaced by the new Cheviot mining area that began production in 2004.

The federal and provincial governments gave the necessary approvals for development of the Cheviot pit in 2000, but the work was delayed both by sagging coal prices and by stiff opposition from environmentalists. Of great concern to those who opposed building a new mine was the well-being of the local grizzly bear population. Elk Valley Coal undertook extensive studies and adjusted its plans to accommodate the bears.

The company has created several other environmental programs in this beautiful and sensitive part of the province. For the bighorn sheep, the company is reclaiming mine lands to habitat suitable for them. Happily the number of sheep has grown from less than 40 in the 1970s to over 800 animals today, and they continue to thrive as mining continues. Other reclamation programs create habitats for elk, mule deer and harlequin ducks.

Cardinal River’s clean coal reserves total 58 million tonnes, enough for 21 more years of mining at a planned rate of 2.8 million tonnes annually.

Rather than build a new wash plant, Elk Valley refurbished the existing Luscar plant to clean Cheviot coal.

Growing prospects, new president

Elk Valley Coal is looking forward to boosting capacity to 30.0 million tonnes of clean coal per year from its current rate of 28.0 million tonnes. The company has already invested in expansion and productivity improvements. Chief among the expenditures was $120 million for development of the Cheviot mine and upgrades to the Luscar wash plant. The company also spent $80 million at Fording River for wash plant upgrades and at Elkview for a new shovel and trucks. The higher capacity should be reached by 2008 as mine plans evolve with lower strip ratios.

There will soon be a new face in the head office to go with increased production. In May 2006, Teck Cominco and Fording announced that Boyd Payne will join the Elk Valley partnership as president and CEO, replacing president Jim Popowich who is retiring after 37 years of service. Payne comes to the
post from BHP Billiton Mitsubishi Alliance where he was vice-president of marketing. His background also includes experience at Gregg River Resources, Manalta Coal and Fording Coal.

As long as coal demand remains strong, there will be a profitable future for Elk Valley Coal. The partnership had proven and probable clean coal reserves of 685.0 million tonnes at Dec. 31, 2005. Add to that another 3.4 billion tonnes of measured and indicated resources plus 4.2 billion tonnes of inferred resources and it is clear that Elk Valley Coal is just hitting its stride.

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