Following several delays in 2016, the Donkin underground coal mine owned by U.S.-based Cline Group in Atlantic Canada was preparing to start operating before the end of January, producing a majority of metallurgical coal along with a smaller amount of steam coal.
Cline's Kameron Collieries subsidiary, based in Halifax, Nova Scotia, spent months last year pumping ocean water out of the mine that was allowed to flood after it was closed by the now-defunct Cape Breton Development Corp. in 2001. Donkin is located along Cape Breton Island’s rugged northeastern coast along the Atlantic Ocean, and some of its coal reserves stretch for miles hundreds of feet below the ocean. Cape Breton is connected to the Nova Scotia mainland by the Canso Causeway.
Donkin initially was expected to commence production last summer, then last fall. In December, James Bunn II, vice president of operations for Cutlass Collieries, another Cline affiliate, predicted production would begin before the end of 2016.
In December the mine had almost 50 employees. Eventually, it is expected to have up to 120 full-time workers, providing a needed economic stimulus to Cape Breton, which suffers from double-digit unemployment.
Once Donkin starts up, its output is projected to ramp up to about 2.75 million metric tons per year (mtpy) by the close of 2017 or early 2018. Some of the steam coal is expected to be purchased by Nova Scotia Power (NSP), the province’s dominant electric utility, for use in one of the utility’s several power plants in Cape Breton. NSP test-burned a small amount of Donkin coal last year and reportedly was pleased with the results. A coal supply contract had not been signed by early January, however.
Cline/Kameron are expected to market most of the met coal overseas, presumably in Asia, with the coal most likely to be shipped abroad via the deepwater pier in Sydney, the largest city in Cape Breton.
Donkin is believed to have sufficient reserves to last for at least 20 years. Its coal is high in quality, averaging 13,000 Btu/lb, 1.6%-1.7% sulfur and a maximum of 10% ash.
The mine was developed for several years by Glencore Xstrata Plc and Erdene Resource Development. Erdene eventually spun off its 25% share to its Morien Resources subsidiary. Xstrata sold its 75% stake in Donkin to Cline in late 2014, with Morien unloading its 25% stake before the end of 2014. In return, Cline/Kameron agreed to pay $5.5 million to Morien plus a gross production royalty of 2% of the first 500,000 mt of coal sales per calendar year and another 4% on any tonnage thereafter.
Nova Scotia once was one of Canada’s leading mining provinces. But mining began to decline there after an explosion at an underground coal mine in the mainland’s Pictou County on May 9, 1992, that killed 26 miners.