Speculation rampant about future of Donkin coal mine in Cape Breton

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SYDNEY, N.S. - Speculation is rampant on the future of the Donkin coal mine but the answer should finally be known this week.
Xstrata Donkin Coal Management will hold a community meeting at the Donkin fire hall on Wednesday night to update residents on whether or not it will follow through with plans to reopen the undeveloped colliery.
"There's a lot of speculation floating around," said Hugh Kennedy, chairman of the Donkin-Port Caledonia Rural Development Association and chair of the Donkin Xstrata community liaison committee.
"I've heard it both sides - that they're going ahead and they're going to cancel it. I can tell you Xstrata has not told me anything."
Kennedy said the development of the Donkin mine could create hundreds of jobs and spark economic spinoffs.
"I'm hopeful, yes, but I'm in the dark as much as anyone else."
Ken MacDonald, vice-president of business strategy and chief financial officer for Erdene Resource Development of Dartmouth, N.S., said he and company president Peter Akerley will be at the meeting.
He said any announcement on the project would have to come from Xstrata.
Erdene holds a 25 per cent stake in the Donkin mine development.
MacDonald said the outlook is good for thermal coal prices. Two years ago, coal peaked at an average of $129 a tonne, but fell back last year to an average of $72 a tonne. The Donkin business case is predicated on a price of $52 a tonne.
"As much as there's a lot of controversy over the burning of coal ... it makes up the most abundant resource of fossil fuels in the world," said MacDonald, adding it's also the least expensive to produce.
Xstrata and Erdene plan to extract 350,000 tonnes of coal a year from the Donkin mine in a $110-million exploratory phase to determine the quality and quantity of the resource before committing to a full-scale mine development.
At a community meeting in December, Xstrata project manager Val Istomin said the company would not approve an exploratory stage until a buyer for the coal is found, which he predicted at the time wouldn't be likely within the next three months.
Istomin said in an email Monday that Xstrata has been investigating its development options and is ready to make an announcement.
"We understand how uncertainty can be very unsettling for folks and we have been very busy reviewing all of our options so as not to drag the process out," Istomin said. "We now will be able to advise the community and other stakeholders of the project's status on Wednesday."
Nova Scotia Power is still in discussions with Erdene and Xstrata "but no commitments have been made at this time," spokesperson Jennifer Parker said Monday.
The power company spent millions of dollars last year adding emissions controls to its coal-fired plants in Lingan and Point Tupper to meet new mercury emissions caps, but Parker said that was to accommodate existing fuel supplies. Donkin coal, she said, contains too much mercury and sulphur to be usable under existing environmental regulations.
"The idea of running a fuel from Nova Scotia in our plants is attractive ... (but) the profile of the coal from Donkin, quite frankly within the caps we have to operate under, mean it's not possible," said Parker.
Devco, a former federal Crown corporation, dug the Donkin tunnels in the 1980s but the project was abandoned before the mine opened due to falling coal prices.
The tunnels were flooded and sealed but the province gave its approval in 2005 to Swiss-based Xstrata to pump out the tunnels and prepare them for production.

Organizations: Xstrata, Donkin-Port Caledonia Rural Development Association, Erdene Resource Development Nova Scotia Power

Geographic location: Cape Breton, SYDNEY, Dartmouth Lingan Point Tupper Nova Scotia

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