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Saturday, October 8, 2011

Xstrata gets in on BC coking coal action with C$40m acquisition

Sat,08 October,2011
By Matthew Hill

TORONTO – Diversified major Xstrata has further dug into Canada’s coking coal, with the C$40-million purchase of the Lossan metallurgical coal deposit in British Columbia from Cline Mining, the Switzerland-based company said on Friday.

The acquisition follows hot on the heels of Xstrata’s August acquisition of First Coal Corporation, which also owns coal licences in the Peace River region of the province.

The company isn’t the only mining giant that has been kicking up dust around Peace River, with rival Anglo American announcing earlier this week that it had lifted its ownership of Peace River Coal to 100%, and was doing a study to raise output there from one-million tons yearly of coking coal to 3.5-million tons by 2015.

The LSE- and JSE-listed miner paid $166-million to the minority owners of Peace River, Northern Energy & Mining Inc (NEMI) and Hillsborough Resources, to buy their respective around-12% stakes in the coal assets, as well as a royalty.

Anglo American made an about turn earlier this year, after having previously said it would lead the sale of Peace River Coal.

“We see significant resource upside and plan to invest in further exploration studies to ascertain its full long-term potential,” CEO of the firm’s metallurgical coal business, Seamus French, commented earlier this week.

Coking coal prices spiked to over $300/t earlier this year after flooding in Australian mines dented global production, though they have since subsided slightly.

Coking coal is used to make steel, and the proximity of north-eastern British Columbia’s coalfields to rail and port facilities that link them to China, which supplies around half of the world’s steel, makes them attractive.

Xstrata said that Lossan had a 240-million ton resource, and covered an area of around 3 800 hectares, meaning that the company now held nearly 100 000 hectares in the area.

Local media reported that Xstrata, the biggest exporter of coal burned in power stations, offered $147 million to buy First Coal Corporation, a privately owned company.

The company operates mines in South Africa, Australia, and Colombia.

TSX-listed Tech Resources is Canada's biggest coal producer.

(sourced MiningWeekly)

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