A coal company in west-central Alberta that in 2011 sold for $1-billion is bankrupt, killing hopes that its mine might re-open in the first quarter.
The Calgary Herald reported that Grande Cache Coal sent a letter to the town bearing the same name, warning that the company is heading into receivership, thus allowing it to restructure. The letter also said the metallurgical coal mine would re-open in July. According to the newspaper, Grande Cache Coal was forced into bankruptcy last week after the mining company’s owner, Chinese coal producer Up Energy Development Group Ltd., defaulted on debt payments in 2016, having owed hundreds of millions of dollars.
About 220 employees lost their jobs in 2015 when the mine shut down, a victim of low met-coal prices. But it looked like the mine was going to enjoy a phoenix-like rise, when in November 2016 Grande Cache Coal and Up Energy said that surface-mine operations were expected to restart in Q1 2017. The restart – no doubt prompted by rocketing coal prices – would however depend on “shareholders’ approval and the negotiation of key contracts,” Grande Cache Coal said at the time. Steelmaking coal prices reached a multi-year high of $308.80 per tonne in November, but have since been in freefall. They settled at $167.80 on Friday, which is still better than 2016, when coking coal averaged $143 a tonne.
The bankruptcy is devastating for the small town of 4,000 northwest of Edmonton, where Grande Cache Coal is the main employer; a year before it closed, the mine had a payroll of 500.
It’s an unfortunate end to what looked like a bright future for Grande Cache Coal, which in 2011 was purchased for a whopping $1-billion by two Asian companies: Winsway, a Hong Kong-listed public company which imports coking coal for the Chinese steel industry, and Marubeni, a large Japanese trading house.The company was later purchased by Up Energy. At the time, coal prices had not yet been crushed by oversupply, waning demand and increasing regulatory burdens which threw the market into disarray. Most of the coal mined by Grande Cache was exported to Asia, where it was used for making steel.
According to the Herald a court-appointed receiver will put its Alberta mining assets up for sale, which include leases covering over 29,000 hectares, with an estimated 346 million tonnes of coal resources in the Smoky River Coalfield of west-central Alberta.