Talisman Energy to sell Canadian coal reserve to Xstrata

International miner Xstrata plc continues to load up on Canadian coal properties, with Talisman Energy Inc. (TSX:TLM) (NYSE:TLM) announcing March 7 an agreement with Xstrata Coal to sell certain non-producing, non-core coal properties located in northeast British Columbia for US$500m in cash.

“This is in keeping with our strategic objective to focus Talisman’s portfolio on material, core assets,” said Paul Smith, Executive Vice-President of North American Operations for Talisman. “Unlocking the value from the divestment of this coal property will provide funds to support the objectives announced in our 2012 guidance.”

The Sukunka coal property is located 60 kilometers south of Chetwynd, in the Peace River coalfield in northeastern British Columbia. The licenses cover an area of over 20,000 acres and contain an underground mineable deposit of coking coal, Talisman noted.

The underground mineable part is critical, since coal mining in this region is traditionally done through cheaper surface mining. That apparently makes this coal reserve more a prospect for the longer term future.

The transaction is expected to close in March. BofA Merrill Lynch acted as advisor to Talisman for the sale process.

Xstrata Coal said in a March 8 announcement that the Talisman property is contiguous with the First Coal Corp. and Lossan tenements acquired by Xstrata Coal in 2011. First Coal is developing a unique surface mining operation that would tap met coal in a steeply pitching reserve area with a specialized highwall miner unit.

Sukunka has a National Instrument 43-101 compliant coal resource of 236 million tonnes in the measured and indicated categories, Xstrata noted. Consultant Norwest Corp. has completed a pre-feasibility study for a longwall mine, which is very unusual for Canada, producing hard coking coal. Xstrata Coal’s technical studies indicate the potential to realize further value from the resource.

Xstrata Coal Chief Executive Peter Freyberg, said: “Based on our due diligence and technical analysis, Sukunka has the potential to be a high quality metallurgical coal mine. Once developed, Sukunka would meaningfully increase our exposure to hard coking coal, while unlocking synergies with our neighbouring assets in the Peace River coalfield and providing additional regional scale.”

A number of coal producers, including Xstrata, have been acquiring coal reserves in western Canada lately, particularly in British Columbia, which generally has the best met coal reserves and also handy Pacific Coast ports to get this coal onto the booming Pacific Rim market.

Talisman is a global, diversified, upstream oil and gas company, headquartered in Canada. Talisman’s three main operating areas are North America, the North Sea and Southeast Asia.

Xstrata plc, which is currently seeking to merge with commodities trader Glencore International plc, is a top five global producer of copper, thermal and metallurgical coal, ferrochrome, zinc and nickel. Its Xstrata Coal unit is the world’s largest exporter of high energy thermal coal and one of the largest producers of coal used to make steel. Headquartered in Sydney, Australia, it has interests in over 30 operating coal mines in Australia, South Africa and Colombia, as well as development projects in Canada.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.