Cape Breton’s Donkin Mine; Xstrata’s nation-wrecking agenda

– A Researcher in Halifax –

XSTRATA (of South Africa & Australia) has the mining licence from the Government of Nova Scotia to develop the Donkin Mine in eastern Cape Breton Island, Nova Scotia. Xstrata is in partnership with a local Nova Scotia company, Erdene Resource Development Corp., to “develop,” i.e., high-grade, the remaining coal reserve as a source of coking coal for steel production. That is the justification to hire only 200 of the 300 workers it originally promised the provincial government it would hire in order to procure the mining licence.

Before we even get to any other concessions this voracious multinational monopoly plans to extract out of the hides of the workers to be eventually hired at Donkin, this reconfiguring of the project to hire one-third fewer workers than Xstrata originally promised in order to snatch the mining licence for itself already represents a major concession by the NDP provincial government.

If Xstrata’s downsizing serves once again to demonstrate why concessions cannot be solutions when dealing with such globally-operating monopolies, the effort of the government and media to wrap this concession in the dignified clothing of an enlightened move in defence of the public’s health is truly sickening.

The original plan reportedly was to licence Xstrata to produce coal that was to be consumed by the thermal heating plants of Nova Scotia Power, which monopolizes the provision of electricity in the province and is privately held (not publicly owned). The most likely reason Xstrata’s Donkin project could not be matched with Nova Scotia Power as an end customer, on the other hand, comes straight from the words of a folk song from the late 1960s, entitled “North Country Blues”: “…’cause it’s much cheaper down/ Some South American town/ Where the miners work almost for nothin’.”

NS Power was already purchasing and importing many tons of “blood coal” from Colombia for use as thermal coal. Hence, this promised hook-up of Xstrata with anything even vaguely connected with Canadian industrial infrastructure seemed highly doubtful even at the time Xstrata expressed “interest” to develop Donkin. The justification being now given of a sudden and touching concern — be it on the part of the NS government, the NS Power monopoly or Xstrata — over the pollution from the mercury, sulphur and worse that consumption of Donkin coal could inflict on the respiratory systems of Nova Scotians is an insult to the intelligence of working people.

The following news article and commentary published by The Halifax Chronicle Herald disclose that the future destination of Donkin output now being arranged is, once again, not part of any kind of nation-building program for Canadian manufacturing. On the contrary, this news confirms that Xstrata’s mission is nation-wrecking.

The Canadian-government-owned Devco coal mining monopoly was set up in 1967-68 to prepare to close down coal mining in Cape Breton and thus open the door to putting an end to steelmaking at Sydney NS, where a steel mill had been in production since the 1890s. Devco developed the Donkin Mine in the 1980s as a possible reserve coal supply for the Sydney Steel mill, by then a much-downsized remnant known as Sysco which was offloaded onto the provincial government of Nova Scotia in the 1970s after being bankrupted several times over by its British and American owners and the Hawker-Siddeley Corp. It was after the provincial government announced its plan to dump its interest in Sysco, effectively closing it forever, that Devco flooded the Donkin workings. In the end, it turns out the key feature of the Donkin site for Xstrata has to do neither with the energy content nor polluting potential of its coal nor proximity of markets but rather with the Donkin site’s access to oceanside port-loading facilities for speeding delivery of the coal to steel mills thousands and even tens of thousands of kilometres from Canada, in Europe and-or Latin America and-or China.

Xstrata’s plans for Donkin coal production in Cape Breton, abetted by major provincial government concessions, are healthy only for its shareholders.

Concessions Are Not Solutions!

Manufacturing Yes! Nation-Wrecking No!

Source: TML Daily, February 18, 2010 – No. 36

Reference: King Coal Can Be Both Fickle and Harsh

– Roger Taylor, Halifax Chronicle-Herald, February 12, 2010 –

To some, it’s a sign of hope for a hard-luck part of the country. For others, the return of coal mining to Cape Breton is a symbol of failure.

Governments, both federal and provincial, have spent millions in an effort to develop a Cape Breton economy unrelated to steel making or coal mining. Today, even though Cape Breton coal has plenty of things going against it, mining seems to be one Island industry that can’t be killed.

Cape Breton’s coal is often described as “dirty coal” because its high sulphur content — and a lot of other contaminants, such as mercury — make it an environmental hazard. And extracting the coal from the underground seams that reach far out under the ocean is both dangerous and expensive.

In fact, coal mining was identified as a dying business as far back as the early 1960s, when the federal government created the Cape Breton Development Corp., predecessor of today’s Enterprise Cape Breton Corp.

Devco, as it was known, had as its objective the transition of the local economy away from a reliance on mining.

Underground coal mining ended about a decade ago but Xstrata Coal Donkin Management announced Wednesday it will open the Donkin mine. The Donkin operation is a partnership between mining giant Xstrata PLC of London, England, and Erdene Resource Development Corp. of Dartmouth.

Xstrata, with a 75 per cent stake in the Donkin operation, has the most influence in determining whether the Cape Breton mine goes into production. The company boasts that it is the world’s largest producer of thermal coal and one of the top five producers of metallurgical coal, commonly called coking coal, used in the steel industry.

While the initial plan called for the Donkin coal to be sold to Nova Scotia Power Inc. for power generation, Donkin backers came up with a Plan B after the electrical utility rejected burning the high sulphur coal last year. Now the mine is to produce coking coal for use by steel makers around the world.

This time, the federal government isn’t investing in the Cape Breton coal project, according to D.A. Landry, spokesman for Enterprise Cape Breton. He told me that neither the Atlantic Canada Opportunities Agency nor its sub-agency, Enterprise Cape Breton, has any money involved in the Donkin project.

“Our mandate … specifically precludes us from being involved in coal mining. That’s because our legislation dates back to the 1960s, when the plan was to get out of coal mining on Cape Breton Island. So our legislation specifically says we are not to get involved in coal mining.”

Funny thing, Devco was operating coal mines in Cape Breton up until a little more than a decade ago.

In fact, the Donkin mine tunnels were dug in the 1980s by Devco at a cost of $100 million. The mine, however, was never put into production. The mine shafts were flooded and the project abandoned.

In 2005, the Nova Scotia government gave Xstrata Coal Donkin Management permission to pump the water out of the tunnels to evaluate if it was feasible to put the mine into production.

Now, the company says it expects to spend about $300 million over three years mining the coal, which will be shipped on barges. Xstrata representatives reportedly said the mine has enough coal to last for 25 years and could employ up to 1,000 people.

OK, coal is back, but Cape Breton residents know better than anyone that mining is a boom and bust business. It is imperative, therefore, Cape Bretoners continue efforts to diversify their economy to prepare for the next time coal isn’t king.

Stake in Donkin to Cost $80m: Dartmouth Firm Isn’t Worried about Raising Capital over Three Years

– Chris Lambie, Halifax Chronicle-Herald, February 12, 2010 –

A Dartmouth-based junior mining company must raise $80 million over the next three years as its stake in the $350-million plan to extract coking coal from Cape Breton’s Donkin Mine.

Erdene Resource Development Corp. is partnered with a subsidiary of Australian mining giant Xstrata on the project that’s anticipated to employ about 200 people and produce 2.75-million tonnes a year of washed export-grade coking coal for up to three decades.

Xstrata holds 75 per cent of Donkin and Erdene controls the remainder.

“We actually have an arrangement with Xstrata where they’re required to pay the first $10 million of development on our behalf,” Peter Akerley, Erdene’s president, said Thursday.

“But other than that, we would be responsible for the remaining 25 per cent.”

Akerley said he’s not losing any sleep over the daunting task of raising $80 million.

“This will be a staged spend on the capital and we wouldn’t expect more than $40 million over the next 12 to 18 months, so if Xstrata’s paying the first $10 million on our behalf, we wouldn’t have any out of pocket expenditures during that period,” he said.

“So following that, we would be seeking either debtor equity to support the capital, and we’ve already had discussions over the last couple of years and certainly more recently with institutions that would be interested in assisting us in funding that. So we don’t have a concern. We have the ability and the interest to put that money together.”

If the company has to start putting money into the project a year from now, Erdene would have another 12 to 24 months to raise the $80 million, he said. Right now, Erdene has about $13.3 million in working capital.

“But if you have a project that is as robust as we believe this one is, you can locate the financing,” Akerley said.

Proponents revised the project from a thermal coal operation after Nova Scotia Power Inc. announced in late 2009 that it would not purchase raw coal produced during the Donkin exploration phase. The utility has said the unwashed coal contains too much mercury and sulphur to be usable under existing environmental regulations.

The coking coal project is far from a done deal, as proponents still need to conduct more feasibility studies and win environmental approvals from both the provincial and federal governments.

“Those hoops have to be passed through before we get to the point where we have a final production decision,” Akerley said.

“Having said that, we have three years under our belt working with the province and the federal government. … So we have a very high level of comfort and confidence with moving forward. But there are still those milestones that have to be passed.”

The original plan to mine thermal coal would have employed as many as 300 people, said Val Istomin, Xstrata Coal’s manager on the Donkin project.

Supplying coking coal to steel works around the world will mean about 100 fewer jobs at Donkin.

“If the mine reaches its full potential, we’ll finish up with four continuous mining units,” Istomin said. “We’ll have about 200 people employed.”

Typically, for every mining job, four other people are employed providing miners with goods and services and repairing mine machinery, he said.

The first continuous mining machine should be on-site by 2011, Istomin said.

“It’s effectively a tunnelling machine. Imagine a bulldozer, but instead of a bulldozer blade it has a large rotating disc on the front of it, which cuts the coal.”

Donkin will need lots of upgrades and a coal washing plant that could cost between $50 million and $60 million, Istomin said.

Xstrata hasn’t finalized any deals for coking coal from Donkin, but it has a large marketing division that’s talking to potential customers, he said.

Donkin is located on a headland on the eastern point of Cape Breton.

“Instead of using trains, we’re actually going to use barge loading directly from the mine on to barges and then trans-shipping it offshore on to ocean-going vessels,” Istomin said.

The ships will use large cranes to grab tens of tonnes of coal and load it on the larger vessels.

Proponents looked at the idea of building a pier that would allow ocean-going vessels to dock near the mine, but the water is shallow and the work would have been extremely expensive, he said.

“But with barging, it’s far more economical and it’s a well proven system of transporting coal,” Istomin said.

Heavy weather could cause problems with this plan.

“There’s a potential impact of the pack ice for sometimes up to six weeks a year,” he said. “There are obviously storm effects where the ocean gets so rough that you simply can’t transport coal. So it means we can’t have a full 365-day-a-year transport operation.”

But there will be room to store coal on-site, Istomin said.

“We’d never stop the mine,” he said. “We’ll design the surface coal-handling facility to be able to stockpile six to eight weeks of production anytime.”

Potential markets for Donkin coal include Europe, South America, India and China, Istomin said.

Full production at Donkin, expected by 2015, could coincide nicely with the widening of the Panama Canal. That project is slated to be finished in 2014, and will shorten the route Donkin coal would take to the Asian market, he said.

“We are one of the most successful mining companies in the world. We certainly wouldn’t be entering into any project unless we thought it was viable and our shareholders could get a profit out of it,” he said.

Ian Flint, a mining engineering expert at Dalhousie University, said coking coal is used as a carbon source in steel production.

“It’s worth a lot more” than thermal coal, “like three or four times,” Flint said.

He wasn’t surprised to learn Donkin proponents have decided to produce coking coal.

“It’s the way to make money,” Flint said.

Coking coal has to be washed to remove impurities, he said.

“It’s typically a washing process where they break up the coal to a certain size.”

1 Comment

Filed under Nova Scotia Government, Working Class

One response to “Cape Breton’s Donkin Mine; Xstrata’s nation-wrecking agenda

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