Long Harbour Exploration Corp. (TSX VENTURE:LHC) is the latest Canada-listed company to want to get into the U.S. coal business, announcing March 6 that it has entered into an exclusive letter of intent to purchase coal assets located in Kentucky owned by Pyramid Inc.
The letter of intent is non-binding except as to exclusivity, Long Harbour noted. Highlights of the assets to be purchased include: substantial in situ coal assets; close proximity to large neighboring loadout that supports access to Asian metallurgical coal markets; fully permitted and operational mine with recent historical production of about 25,000 tons per month for the pulverized coal injection (PCI) market; and permitting underway to commence surface mining and expand underground operations to increase production.
The operational mine is focused on mining the Whitesburg and Elkhorn coal seams. Long Harbour said it plans to increase production following the acquisition and to focus on the international markets that place great demand on high-quality coal. The mine is located in proximity to a state-of-the-art rail loadout with a capacity of 92 rail cars, with coal moved from there via rail to barge facilities for offshore shipment.
The transaction is subject to TSX Venture Exchange approval.
Long Harbour CEO Peter Espig said: “We are fortunate to have an opportunity that may allow us to leverage our management and board’s rich experience in the coal and shipping sectors with deep Asian networks. Arbitrages exist with regards to consolidating coal from smaller producers and the US versus Asian market demand for metallurgical coal to which these assets could play a vital role. In addition, because the mine is fully permitted and fully operational, start-up timing and CAPEX exposure is significantly mitigated. Operations are expected to be simplified because, rather than assuming full mining responsibilities, we expect to enter into a mining contract which will allow us to leverage Pyramid’s local mining expertise.”
There are no mines listed with the U.S. Mine Safety and Health Administration under Pyramid Inc. There is also no Pyramid Inc. listed with the Kentucky Secretary of State or the U.S. Office of Surface Mining.
Long Harbour said in a Feb. 28 financial filing in Canada that it is a Vancouver-based junior mining exploration company that is pursuing the acquisition and development of highly prospective exploration properties in the precious metals and mineral sectors. The company currently owns two uranium properties in the Eastern Athabasca Basin, Saskatchewan.
The company said in the filing that it currently has sufficient capital to meet anticipated corporate administration costs into March 2012, and has secured commitments for financing, subject to TSX approval, that will allow it to continue current operations to approximately into June 2012.
In the past few years, several Canada-listed companies, including Royal Coal and Novadx Ventures, have gotten into the Appalachian coal business, attracted in part by relatively small operations that require relatively little capital investment, as compared to the generally much larger mines in the western U.S. and western Canada. There have also been U.S. companies, Xinergy Ltd. and Corsa Coal, that in the past couple of years have sought stock listings in Canada because of a friendlier environment there for small-cap mining companies.