Although oil sands hog the headline of the Canadian energy story, western provinces also boast rich deposits of thermal coal, uranium and natural gas. With
shifting regulation in Canada and immense potential overseas, producers and developers are beating a path to Asian markets to peddle their resources. And
for good reason – China and India alone are expected to require nearly a third of the world’s energy production by 2035.
Back in black
The seaborne thermal coal market promises growth for current and future coal producers in North America. Cheap natural gas is accelerating Canada’s and the
United States’ transition away from coal-fired electricity generation, yet, globally, the International Energy Agency foresees coal increasing its share of
the energy mix by 1.2 billion tonnes by 2017, thanks in large part to Chinese and Indian electricity demand.
In that same time period, Canada’s exports will roughly double. They stand now at a comparatively small six million tonnes per annum (mtpa), the bulk of which is supplied by Sherritt International’s four mtpa Mountain
operations. Hillsborough Resources’ 0.5 mtpa mine on Vancouver Island, as well as thermal coal produced by B.C.’s and Alberta’s metallurgical operations
also contribute to exports.
By 2017, Coalspur Mines Ltd. promises to add five mpta with its Vista project, a dedicated thermal coal mine near Hinton, Alberta. The mine is expected to
produce 12 mtpa from 2019 through to the end of its 29-year life.
David Montpetit, Coalspur’s vice-president of external affairs and logistics, says new funding should allow production to begin in 2015 as scheduled. A
US$300-million debt facility from EIG Global Energy Partners “will fund construction for 2013 and partially into 2014,” he predicts. “We are confident that
we will have the remaining funding requirements in place by the end of the first quarter 2013.” At lowest estimates, the total construction cost would be
Projects further on the horizon could also boost Canadian thermal exports. Hillsborough Resources has applied to build a second mine, Echo Hill, near
Tumbler Ridge, B.C., which would produce between 1.0 and 1.5 mtpa during a 10- to 14-year mine life using a combination of contour and highwall auger
mining, beginning in 2015. Around the same time, if it gets the go-ahead, the metallurgical-focused Donkin coal project proposed by Morien Resources Corp.
in Nova Scotia, would also produce thermal coal over its 20-year life, initially feeding local generators but entering the export market if conditions are
Struggling U.S. coal miners have set their sights on the same opportunity, but at higher volumes. U.S. producers exported about 25 million tonnes in 2011
and are seeking ways to export more, which includes increasing access to West Coast ports. Montpetit points out that this development has encouraged B.C.
ports to expand their coal terminals, which may benefit Canadian producers as well.
Planning and patience
Nearly half of U.S. thermal coal exports were Europe-bound in 2011. Countries that suspended their nuclear programs in response to the Fukushima meltdown
have made only tentative motions to restart, relying on gas and coal to fill the gap.
This weak demand for nuclear fuel has put a number of uranium projects on hold until markets improve. Uranium giant Cameco Corporation has revised its
global growth plans from 20 to 16 additional million pounds of uranium oxide by 2018.
But a dearth of major projects coming on stream in the next few years suggests that when demand does pick up, supply could be tight. The forecasts used by
Cameco show worldwide uranium demand growing three per cent annually. Projected Asian electricity demand, as usual, accounts for a large chunk of this; of
the 64 new reactors under construction around the globe, 36 are found in China and India. Cameco’s growth figure also factors in restarts among Japan’s 48
idled reactors. In January, the country’s new nuclear authority released draft guidelines for the restart of reactors and anticipates finalizing those in
July. “We expect six to eight of the units to be restarted this year and then growth going forward,” said Tim Gitzel, president and CEO of Cameco, in
Nuclear plants in the U.S. will lose 24 million annual pounds of uranium oxide supply when America’s Megatons to Megawatts agreement – whereby uranium from
Russian warheads is converted for use in American generating stations – expires this year. Without political motivation to extract uranium from stockpiled
weapons, further nuclear warhead supplies will be limited, says Ian Hiscock, senior consultant at CRU Group. “Warheads are expensive to dismantle,” he
explains. “You need some highly specialized skills to do it.”
The stable, high-grade Athabasca Basin of Saskatchewan will help meet uranium demand, especially since the Canadian government has completed a bilateral
export agreement with China and has started negotiations with India. Cameco plans to bump up production at its McArthur River mine from 18.7 to 22 million
pounds in 2018, and its Cigar Lake mine, with a late-2013 start-up date, will produce 18 million pounds of uranium oxide annually. French nuclear
conglomorate Areva, with shares in these two Cameco-operated mines, anticipates exporting uranium to China later this year.
Exploration activity also continues in the Athabasca Basin, which produced 17 per cent of the world’s uranium in 2011, although any new projects would only
begin producing towards the end of this decade. Areva’s numerous exploration properties include Shea Creek at about 88.1 million pounds Measured and
Indicated Resources. Rio Tinto continues to drill and perform environmental baseline research at the Roughrider deposit it acquired after completing the
deal to purchase Hathor Exploration in 2012.