After 22 years in care and maintenance mode, Teck has finally decided to do something with Quintette.
They have decided to sell it.
The announcement came Dec 19, after months of speculation.
The mine will be purchased by Conuma Resources Ltd. For $120-million, plus 25 percent in net profits once Conuma recovers its investment in Quintette.
The sale has been announced, but is still subject to regulatory approvals, “and other customary conditions.”
That means, says Brian Sullivan, CEO for Conuma, that the sale won’t be official until probably mid-February. “The ordinary timeline on those sorts of things is somewhere in the neighborhood of 30 to 45 days,” says Sullivan. “So theoretically, we’re looking at mid-February time when the regulatory approvals could be granted and then at that point, we would formally close the transaction and the asset will become Conuma’s.”
Sullivan says the conversations around the sale of Quintette has been in process since July of 2021. “We had the chance to work with Teck and 4 Evergreen to take all the legacy coal that was sitting at Quintette off site, and process it over at Wolverine,” he says. “We had been in communication with them about that opportunity, which ultimately came to pass in September of 2021. It allowed Teck to really get a sense of who we were and could they trust us? Could they work with us? We have certainly coveted the possibility of Quintette becoming a Conuma operation since we’ve been in Tumbler Ridge.”
It also gave Conuma a unique look at the quality of coal at Quintette. “We had a good opportunity to see the quality of the coal. We ran it through our plant and sold it.”
After that successful first project, says Sullivan, discussions started with Teck organically about how the two companies could continue that relationship. “How can we help them create value from an asset that had been care and maintenance for about 20 years? So conversation about the next step started in November and December of 2021 and then really started to gain momentum through the spring.”
The two companies, says Sullivan, looked at a bunch of different options over the next few months, finally settling on the heart of the agreement in summer of 2022. “We then spent quite a while—three or four months—really documenting the transaction to everybody’s satisfaction with the asset purchase agreement being signed on the day that it was actually formally announced by Teck.”
That was Dec 19. Moving forward, says Sullivan, they need to wait about a month before the regulatory approval is given. “The regulatory approval that we require is from the competitive authorities at the federal level to make sure that there’s no anti-competitive effect from this transaction,” says Sullivan. “That’s really just pro forma. Any asset transaction involving competitors over a certain threshold requires approval. We don’t expect any issue there since it’s increasing competition. It’s increasing the availability of steelmaking coal to export from Canada, so there really isn’t any anti-competitive effect, but we still have to go through that process of notifying regulators and allowing them to review the transaction.”
Quintette already has a mines act permit in place, which means that it’s basically just a name change, says Sullivan. “Transferring the permit from Teck to Conuma really is a fairly simple regulatory process. The longer lead time item will be demonstrating that the effect of restarting the operations will not have a negative effect on the aquatic environment, viz a vie, Selenium or any other elements of concern. That means we have a water effluent permit that also has to be issued to Conuma. The Quintette property is in compliance with that permit, and we would expect that our operations would continue to have that permit be in compliance. So all that being said, we’ve still got some months of work to do to complete the mine plan. You would expect that for a facility that’s been idle for 20 plus years. We need to do some work inside the preparation plant to modernize it. And some things need to be built to allow the plant to run efficiently.”
But, if all things go well, says Sullivan, he expects the mine will start operating in October of this year.
Does that mean that Conuma will need to bring on more people to operate the mine? No, says Sullivan. The Perry Creek deposit has enough coal to last until spring of 2024, so as that operation is wrapping up, Conuma will begin moving people over to Quintette.
But what does that mean for Mount Hermann, which has been Conuma’s next planned step after mining out the Perry Creek Deposit?
Sullivan says Hermann has been the ultimate goal after the current deposit is mined out, but they do not plan to operate the two mines at the same time.
“Herman is a still quite a valuable resource,” says Sullivan. “And it goes most logically to Wolverine, so, we won’t stop working on Hermann, but it’ll be re-prioritized in terms of where we spend our time because the bigger, better opportunity right now is getting Quintette up and running. Hermann would be a project we would continue in the future.”
Of course, with Quintette having at least 42 million tonnes of known reserves and at least 200 million tonnes estimated reserves, the mine has a fairly long life span. Wolverine currently produces 1.5 million tonnes per year. While Quintette has the capability of up to 5 million, the plan is to currently keep producing at about the same rate as current. That means Conuma is looking at anywhere from 28-130 years at Quintette, and a lot can change in that time.
But, says Sullivan, right now, the plan is to keep things as is. “We would not expect to have a significant increase in the number of people. The people who are currently running the Wolverine plant would likely go over and run the Quintette plant. This is early days, but the equipment and people that are mining to the end of Wolverine will be the most likely candidates to start up Quintette. We don’t expect the influx of hundreds of new people looking for housing, pushing the housing prices beyond reason, and the sorts of things that we saw in Chetwynd when the pipeline was coming through. Those sorts of things. The impact on Tumbler Ridge will be positive in that a long lived asset is being brought back into production. I think that’s a tremendous benefit for Tumbler. But in terms of the people impact, don’t expect the land rush type scenario where you’ve got people pulled over on the side of the road sleeping in campers.
While Teck has sold the mine, it retains a “net profits interest.” This means that as long as the mine operates, they will get 25 percent of the profits. With the potential of hundreds of millions of tonnes of reserves at the mine, that could be a very long time, indeed. But, says Sullivan, those resources are in more remote corners of the mine, that still require exploration. “A mine plan needs to be put together to determine whether that coal will ultimately be findable and salable. So there’s still a lot of work to do. But that’s part of the excitement.” And, either way, he says, the project will be in play a long time.
One of the biggest changes this will lead to is the re-establishment of the rail line out to Quintette. “There’s a modest amount of rail rehabilitation that needs to be done,” says Sullivan. “The track is in good shape between Wolverine and the old Peace River Coal loadout.”
Peace River Coal was in operation until 2014, before it was put into care and maintenance. Beyond that, says Sullivan, there’s about five kilometers of track to get to Quintette. “There are a few places where there’s been wash-outs. Areas that need to be fixed. There’s a small waterway the track crosses, and we’d have to replace some culverts, etc. So our plan is to ship the coal out of the Quintette preparation plant using the facilities that are there. Doing so would avoid trucking coal all the way back to the our preparation plant at Wolverine. Our contract with CN would have to be modified, but we don’t expect any issue in terms of the volume or capacity on the Tumbler Ridge subdivision.”
Conuma, says Sullivan, is very invested in the long term success of Tumbler Ridge, and he hopes this deal shows that. “We’ve made a tremendous investment in our people. Investment in the relationships that we are building with our communities—whether they’re First Nations or communities or stakeholders. We’ve, we’ve put hundreds of millions of dollars into equipment, training and everything that we’ve done in the last almost seven years now. The goal for me, for the board, and for the management team is to create a sustainable company. Sustainability isn’t a buzzword. It has different meanings to different people. But from my perspective, I want to make sure that we are a sustainable company for our employees and communities, so making sure that people in Tumbler Ridge understand that we’re going to be here another seven years. We’ll be here another 17 years. And so we want to make sure that we have the assets that help us do that. And we want to prove to all of our stakeholders that Conuma is a company that’s trusted to run in a responsible way.”
Trent is the publisher of Tumbler RidgeLines.
