Many analysts are forecasting that coal prices will continue to rise, especially metallurgical coal.
This would seem to hold up as a valid forecast as we consider the amount that a giant like Teck Resources (TSX:TCK.A)(TSX:TCK.B)(NYSE:TCK) has spent entering the coal industry. Teck states that coal accounts for 43% of their business. Considering the position Teck was in, as the global recession was really starting to be felt around the world, their insight to enter the coal sector as strongly as they did speaks volumes. This is a company with an extensive history in the mining industry. If we think that this move has proven to be extremely well timed on Teck Resources part, I believe Compliance Energy will stand to benefit quite handsomely from the Raven Project.
The Raven Project consists of 97.5M tonnes of measured & indicated, as well as, 34.5M tonnes of inferred and this is NI 43-101 compliant. Studies have shown that 88% of the coal contained in the Raven Project meets the standards of being graded as metallurgical coal which is used in the production of steel. Although the coal is semi-soft coking coal grade, this coal can still be used as a blended product in steel making, and thereby is of considerable value. As the demand for this type of coal increases I expect the price will continue to react accordingly. Currently the price for this grade of coal is between $235 - $275 per metric ton. This bodes well for Compliance since their estimated cost is in the range of $76.50 per metric ton. With resources that leave the estimated life of mine at 17 years, one can easily see the tremendous potential present here.
Having a large deposit is of course never a bad thing, but when your large deposit is close to deep water access, this is an obvious positive feature. Raven Project has a few possibilities of how and where to access a deep water port. The most likely choice seems to be at Port Alberni which is located 82km (50 miles) by four lane divided Highway 19 for a portion and by Highway 4 for the remainder. This leaves Compliance Energy at a distinct advantage from a cost basis for transportation, not to mention that from Port Alberni to the Asian market, is considerably less distance than say, Australia.
The Company has completed a positive Preliminary Assessment Report on the Raven Underground Coal Project in late 2007 and a positive Preliminary Feasibility Study in October 2010, copies of which are available at www.sedar.com. The proposed Raven Project is subject to a comprehensive multi-year federal and provincial environmental assessment process. The Canadian Environmental Assessment Agency (CEA Agency) and the British Columbia Environmental Assessment Office (EAO) have invited the public to comment on the project’s draft Application Information Requirements /Environmental Impact Statement (AIR/EIS) Guidelines document. The public comment period will open May 18, 2011 and close June 27, 2011. http://www.theravenproject.ca/all_files/raven_project_facts_public_comment_period_may10-20110510-091331.pdf
Now that we have looked at all these facts, let's look at some of the relevant numbers for this deposit.
High Volatile “A” Bituminous
Semi – Soft coking coal with good coking characteristics
--Ash 9.5% (Washed)
-- Free-swelling index 8.0
--Average Fluidity 2,694 ddpm
--Sulphur average 1.12%
With this much coal, who will they sell it all to, not that there would be any problem finding sale for this type of coal at present, nor for quite some time into the foreseeable future. Compliance has already got that covered in a very effective manner. During 2008, the definitive agreements signed with I–Comox Coal Inc., a wholly owned subsidiary of ITOCHU Corporation and LG International Investments ( Canada) Ltd., a wholly owned subsidiary of LG International Corporation (the “Parties”) provided for the creation of a new joint venture named the Comox Joint Venture to investigate the possibilities of developing the Raven Coal Project. http://www.complianceenergy.com/index.php?id=88
It is very difficult not to get a sense of just where Compliance Energy Corporation is working there way towards. With these two companies capable of moving vast amounts of coal it is entirely possible that Compliance will not have to worry about finding sale for any of the coal produced.
Compliance Energy Corporation has slightly under 63 million shares with slightly over 76 million shares on a fully diluted basis. It may be necessary to raise some money in the future for construction, but the company is already planning on how to minimize any further dilution. There is one other aspect to Compliance, and that is they currently hold approximately 2.2 million shares of Copper Mountain Mining (TSX:CUM). Copper Mountain is a copper mine that has just gone into production and is expected to achieve full production within the next month or less. This will have a very positive effect in regards to Compliance wanting to minimize dilution looking forward to such time when construction is to take place.
As with all companies, management is probably one of the more important factors that needs to be looked at. In the case of Compliance Energy Corp. it would be difficult to not say this is a management team that has extensive experience.
Mr. John A. Tapics P.Eng. has been Chief Executive Officer and President of Compliance Energy Corp. since November 1, 2005. Mr. Tapics has over 30 years experience in power generation, transmission and distribution, mine planning and operations, and project development. He served as President and Chief Executive Officer of Alberta Electric System Operator. He served as Senior Executive of TransAlta Corp. from 2003 to 2005. He served as eleven as an Officer of TransAlta ...
J.C. (Jim) O'Rourke graduated from the University of British Columbia with a B.A.Sc. in Mining Engineering. Over the next 14 years, Mr. O'Rourke was involved in the start–up of a number of major mines including Gilbralter, Marcopper, and Endako while working with Placer Development Limited.He has over 30 years of hands–on experience in mine evaluation, financing, development, operations and marketing in Canada, the United States, South American and the Philippines. Prior to his retirement, Mr. O'Rourke was responsible for the acquisition, evaluation, financing and development of the $140 million Huckleberry open pit copper mine in Northern British Columbia. Mr. O'Rourke is currently the President and CEO of Copper Mountain Mining.
Jim Defer graduated in 1987 from the University of Manitoba with B. Comm. (Honours). Mr. Defer is a CA & a CBV and a member of the Institute of Chartered Accountants and Canadian Institute of Chartered Business Valuators. He joined the Company as Chief Financial Officer effective March 01, 2010. Mr. Defer has significant experience in investment banking, capital markets, corporate finance, as well as accounting, valuation and financial advisory services. Most recently, he was head of investment banking for a Vancouver based firm and has held senior managerial roles with two major accounting and auditing firms.
I am of the opinion that this is definitely not only a much needed company with a project that will bring many positive economic benefits to this area of Vancouver Island, but one that has taken the time to ensure that the environmental footprint they leave is as small as possible. Compliance Energy Corp. has involved the communities that stand to be affected along with extensive cooperation with the First Nations of the area. Compliance has also taken every possible chance to prove that they not only care about the communities and the people but also that they are prepared to take whatever steps are deemed appropriate to ensure that there will be no environmental issues that may cause damage.
First Nations Consultation
Consulting and met with twenty (20)First Nations
K’omoks and Qualicumare the primary two First nations for the mine.
Seven first nations need to be consulted for the port upgrade.
One First Nation proposes to be involved in transportation -trucking/port
In closing I would like to draw your attention to my opening comment. Timing is truly an important part of most if not all investments. For Compliance Energy Corp., I see this being as close to perfect timing as possible. While the actual process is still being navigated, this stands out to me as one of the more exciting companies with an incredible amount of potential. This is in my opinion a perfect time to explore this potential.
I would suggest to those who see the incredible potential with Compliance Energy Corporation, or that may have an interest in possibly investing, please do your own due diligence. A very good place to start this would be at the company website, which can be found at, http://www.complianceenergy.com/index.php?id=27.
For disclosure purposes I have received no compensation of any kind for this post. I do own shares of Compliance Energy Corp.