BC government buys Klappan coal licences to spur Aboriginal parleys

6th May 2015 By: Henry Lazenby - Creamer Media Deputy Editor: North America

BC government buys Klappan coal licences to spur Aboriginal parleys

Exploration drilling at the Arctos project, British Columbia.
Photo by: Fortune Minerals

TORONTO (miningweekly.com) – The British Columbia (BC) provincial government has bought 61 coal licences in the Klappan region from joint venture partners Fortune Minerals and Posco Canada for $18.3-million, in an effort to move forward discussions with Aboriginal groups on a shared development vision for the region.

“Developing a shared vision for responsible management of the Klappan is critically important to the Tahltan Nation, the province and to industry. This acquisition provides certainty and solves a timing problem that was preventing progress on these discussions,” Energy and Mines Minister Bill Bennett said on Monday.

The acquisition was regarded as the fairest way to preserve the licences’ potential future value, while providing the time and certainty necessary for discussions to move forward between the Tahltan Nation and the province.

British Columbia Railway Company, which had the ability to acquire coal mines and land under the BC Railway Act, was using its cash reserves to acquire the licences as agent of the province, allowing the transaction to take place with no impact to the government’s current fiscal plan.

Under the terms of the purchase agreement Fortune and Posco had a ten-year back-in option, up to 2025, to repurchase the licences at the original price after the province and the Tahltan Nation had developed a shared vision for the Klappan.

“This is a fair solution that recognises the investment made by the companies secures the potential value of these assets for the future and respects the position of the Tahltan Nation," Bennett noted.

Located in north-west BC, the Klappan is a special area forming part of a region known as the Sacred Headwaters, which held significant cultural importance to the Tahltan Nation, as well as some significant anthracite coal deposits.

Fortune and Posco had held the 16 411 ha in assets since 2002 with the intent to further develop a mine, but their development schedule was moving more quickly than discussions with the Tahltan Nation, preventing progress from being made on a shared vision for the entire area.

BC’s main coalfields lay in the east of the province, in East Kootenay and Peace River. However, one key area yet to be tapped was Klappan, in the north-west. This region hosted anthracite, which, among its various industrial uses, was the highest-quality metallurgical coal available.

Fortune Minerals’ Arctos anthracite project, which had been the subject of opposition from some Tahltan Nation members, was one of the first movers in the coal-rich area.The Arctos project had the potential to generate $10-billion in revenues and $900-million in combined federal and provincial taxes over its life span and could provide economic opportunities for more than a generation of northern British Columbians.

However, the company’s summer 2013 drilling, surveying and monitoring campaign for environmental assessment was voluntarily ended in September of that year after a Tahltan Nation group entered the project’s camp to protest.

In December, government issued the Klappan Coal Licence Deferral Area Order, deferring decisions on any new coal licences until December 1, while the Tahltan Nation and government took the time to consider what activities were appropriate in the Klappan. This order included existing coal tenures.

More than $110-million had already been spent over 30 years to identify the high-quality anthracite metallurgical coal resource that was "world-class" in scale.

Fortune and Posco would share the transaction proceeds equally, with Fortune having indicated it would use its $9-million share for working capital and to repay debt.