Riversdale Resources

Head north


As coal mining seems to get more expensive, Australian mine developer Riversdale Resources believes it has secured some of the world’s most competitive projects in North America.
 
The last time we caught up with unlisted public company Riversdale Resources – famous for selling its original Mozambique-based operation, Riversdale Mining, to Rio Tinto – it had jumped the Atlantic to secure a highly prospective metallurgical coal project in Alaska, US. While comprising an entirely different climate and landscape to Riversdale’s previous venture, what really differentiated the Chickaloon Project was its plenitude of infrastructure – the lack of which had stalled Mozambican operations.
 
The Chickaloon Project has since been financed, through Riversdale raising AU$67 million this year ($90 million since its incorporation in 2011) from its two partners Macquarie Bank and Resource Capital. Managing Director Steve Mallyon reveals that the company looked at making its IPO earlier this year, but backed out after realising the difficulty of raising money at the time.
 
Approximately $7 million has been spent on further developing Chickaloon, including two drill campaigns producing 15 boreholes over 10% of the lease area, and an extensive community engagement programme. However, Riversdale has concluded that the project’s development cycle could take 5-7 years. This is part of the reason why Riversdale decided to spend almost $50 million on acquiring coal properties within the Crowsnest Pass Complex in Canada, from US energy companies Devon and Consol Energy.
 
“While the team on the ground has been very busy on Chickaloon, Anthony [Martin, Riversdale’s Chief Financial Officer] and I were busy looking for a development opportunity that was more sustainable – in other words, one with a reasonably long life and good quality hard coking coal – but which was going to be competitive through a number of development cycles,” says Steve Mallyon.
 
“As people who have now operated in two large coal regions, Queensland’s Bowen Basin and Mozambique’s Moatize Basin, we were surprised to find that the only country combining all the factors to make a potential coal project competitive over its lifecycle was Canada. We needed a combination of very good quality coal, very good infrastructure, low strip ratio and a skilled, productive workforce.
 
“Certainly Mozambique has huge resources, but even Rio and Vale are struggling to bring projects forward there,” he continues. “And we’ve found the coal industry of our home country, Australia, to be in big trouble – from 2011 onwards it has suffered declining productivity, very high strip ratios in the Bowen Basin, very high rail and port charges and very high royalties to the government.
 
“Canada, on the other hand, has some very good quality coal and a brilliant rail system that is very high capacity and highly competitive on a per-tonne basis. Some of the coal is a fair distance from the coast, but even accounting for the distance the delivered cost of coal is more than competitive with Mozambique and Australia. We felt that Canada was about to have its day.”
 
Grassy Mountain
 
The Crowsnest Pass Complex in southern Alberta, Canada, is now Riversdale’s primary development focus. It sits in a historic mining region, mined for more than 100 years and currently host to five mines operated by Teck Resources. Nearby are two mining towns, Blairmore and Coleman, each of which has around 3,000 residents including many with mining skills and experience. The location was one of the key factors that attracted Riversdale to the area.
 
“The thing that attracted Anthony [Martin] and I when we first visited Crowsnest Pass in 2012 was the location; it’s located just off Highway 3, which is the main highway leading up to Calgary, from which we’re about 150km south,” says Mallyon.
 
“Another extremely attractive asset for us was the Canadian Pacific rail line, which runs through Crowsnest Pass and through to Vancouver, where there are a number of port terminals. We’re about 1100km from Vancouver, which seems like a long way, but as mentioned before the rail and port costs are extremely competitive.”
 
Within the vast Crowsnest Pass Complex is Riversdale’s most advanced project, Grassy Mountain. It is far advanced because the previous owners did a significant amount of work on it in the 80s, including a full Feasibility Study (FS) that defined 192 million tonnes (Mt) of hard coking coal/thermal coal resources containing 61.2Mt of marketable reserves. The coking coal is “extremely low sulphur,” says Mallyon, and “very amenable to the steel companies we know in North Asia, Brazil and Argentina”.
 
When it came to checking and updating the Grassy Mountain Project’s credentials with a Pre-Feasibility Study (PFS) of its own, Riversdale could utilise a huge drill database of 364 holes, as well as previous work on coal quality, mine planning and full pit optimisation. The PFS estimated attractively low capital costs for the project of around $360 million for 2.2Mt of product capacity, helped in part by its proximity to existing infrastructure but not entirely. Chief Financial Officer Anthony Martin says that Grassy Mountain’s capital costs, as well as its operating costs, are brought down significantly by its low strip ratio.
 
“For the first 13 years the product strip ratio is 6:1 and for the life-of-mine it’s 7.4:1 – obviously that lowers the operating costs, but it also lowers the capital as we don’t need a truck fleet as large as other operators who are moving much more material,” he remarks. The current projected mine life is 28 years of producing 2.2 million tonnes per annum (Mtpa), but that could change if Riversdale manages to increase its current 61.2Mt reserve through its upcoming drill programme.
 
“We expect to increase our current reserve and in our FS we’ll be looking at enlarging the project so that it has a 4Mtpa production rate over a 20+ year mine life,” Martin adds. “We are looking at these opportunities because they make economic sense, and more importantly we know the rail capacity is available.”
 
Moving forward
 
Riversdale is just reaching the end of the Grassy Mountain PFS now, with only the coal quality component left to complete. The company has already made a start on the Environmental Impact Assessment, community and First Nations consultation, hydrology and Lidar survey elements of the full FS, which Mallyon expects to take between 12-18 months to complete. “We think the project’s probably likely to kick off production sometime in 2018,” adds Mallyon.
 
He says that in 2014, Riversdale would like to sign off on the infrastructure access and increase the proven and probable reserve. The company is also keen to spend some time exploring its other properties within Crowsnest Pass: Bellevue, Lynx Creek and Adanac. Mallyon sees the latter as particularly attractive, for sharing coal seams with Grassy Mountain.
 
While Riversdale will spend most of the year in Crowsnest Pass, the company doesn’t intend to neglect Chickaloon. “In a geological sense, Alaska is the last great frontier for coal; the US Geological Survey estimates that there are 3 trillion tonnes of coal resources in the Chickaloon area,” says Mallyon.
 
“It’s so prospective that we certainly don’t want to focus solely on Grassy Mountain, but the reality is that we’re a private junior company and we have to focus most of our meagre resources on a development project. So we are looking at the potential for a farm-in or Joint Venture with another company that has some experience and can do some of the day-to-day work on the ground to keep the project moving forward. We’ve had a few enquiries from some US companies.”
 
Mallyon and Martin are glad that Riversdale did not make its IPO this year, and feel fortunate to have been able to raise money through their “very supportive” large shareholders instead. However, they have certainly not ruled it out. “I think that in the long term, given that we have quite a lot of small shareholders, we’d like to see a path to a listing – most probably on the ASX in Australia – and we’ll do that when circumstances allow,” says Mallyon.
 
“But we feel that we need to produce some results before we list on an exchange. We’d like to have ticked off some of the things on our checklist for the next 12 months before we consider listing.”
 
Unsurprisingly, given Riversdale’s history in three different continents, it does not rule out further globe hopping. However, with at least one project expected to have a mine life exceeding 20 years and a number of other prospective targets, the company appears happy to settle down in North America for the time being.
 
“With Grassy, Adanac and Lynx, which we haven’t looked at yet, we can see ourselves working in that region of Canada for the next decade,” Mallyon remarks.
 
“Other parts of the world interest us; for example, apparently central Kalimantan has very good quality coking coal. But Canada has the strip ratio and infrastructure we want, and it’s hard to look beyond what we have when we see so much unrealised potential here. Add to that the fact that we’ve got a community on our doorstep who are experienced in the coal sector and receptive to the idea of a new coal mine on their doorstep – which we haven’t quite experienced before – it’s a nice place in the world to be.”  

Recent Posts