Morien completes sale of its stake in Donkin coal mine to Cline Group

Morien Resources Corp. (TSX VENTURE: MOX) on March 2 announced the closing of the transaction with Kameron Collieries ULC, an affiliate of The Cline Group LLC, for the exchange of Morien’s 25% working interest in the Donkin Coal Project in Cape Breton, Nova Scotia, for cash and a production royalty.

Approval of the transaction was given at a special meeting of the company’s shareholders held on Feb. 10. The consideration being paid for the interest is C$5.5 million in cash and a gross production royalty of 2% to 4%. On closing, Morien received an initial cash payment from Kameron of C$2 million. The remaining cash consideration of $3.5 million is to be paid in stages. In addition, Morien closed a private placement in December 2014 with Atlantic Royalty LLC, a subsidiary of The Cline Group LLC, for 3.45 million common shares in Morien at C$0.30 per share, a 58% premium to market, for gross proceeds of C$1,035,000.

Kameron also agreed to pay Morien a gross production royalty of 2% on the first 500,000 tonnes of coal sales per calendar quarter and 4% on any coal sales from quarterly tonnage above 500,000 tonnes. Based on the current permitted production rate for the underground mine project of 2.75 million sales tonnes per year, and on current and forecasted coal prices, Morien management and its Board of Directors estimate that royalty payments could range from C$4.6 million to C$6.7 million annually.

Kameron commenced dewatering of the access tunnels at Donkin during the first quarter of 2015 and expects to have the tunnels fully dewatered by the third quarter of this year. Kameron has also recently begun the process of clearing the right-of-way of a 69-kV power line at the project, and in regards to coal marketing has had positive discussions with prospective overseas buyers, and with Nova Scotia’s local power utility, Nova Scotia Power, to supply coal to local power plants.

The Donkin Coal Project is fully permitted, including approval for construction of an on-site barge-loading facility to access deep tidewater. Approximately C$43 million has been invested in the project since 2006, including C$15 million by Morien and its predecessor companies.

Cline Group, founded by U.S. coal operator Chris Cline, has separately bought the other 75% of the Donkin project. Cline has hired Paul Vining, a veteran coal marketer with past stints in top positions at various U.S. coal companies, most recently Alpha Natural Resources (NYSE: ANR), to head his non-U.S. coal operations.

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.