Tuesday, November 15, 2011

Compliance Energy stands to potentially benefit from comments made by Premier Christy Clark

Compliance Energy Corporation (TSXV:CEC) is a Canadian resource company that has coal interests in British Columbia, Canada. Through the Comox Joint Venture (‘CJV’), CEC owns 60% of the Raven Underground Coal project and is the manager & operator of the CJV. The semi–soft coking coal resource is 43–101 compliant and consists of 97.5M tonnes of measured & indicated, as well as, 34.5M tonnes of inferred. Just 82km (50 miles) from a deep water port, the Raven project is a near term producer ideally situated near power and transportation corridors.

With Premier Christy Clark in China, on a trade mission, Clark has made an announcement that the Chinese are betting significantly on BC coal.  http://www.vicnews.com/business/133577168.html
In this release, I noticed that Clark has made a point of mentioning to the Chinese  company executives about the major investments office being set up by the B.C. government to speed up approvals for projects like the mines. This is the type of dialogue that holds great potential for a number of companies, and more specifically it could hold potential for Compliance Energy.

While some people view coal as a has been product, this investment by the Chinese would make a strong argument against this view, and in fact shows just how important coal remains in the market today, and for many years ahead. The amount of research that has gone into making coal less destructive, in environmental terms, is quite significant. Many breakthroughs have been accomplished, as can be seen in this article in EngineerLive, http://www.engineerlive.com/Power-Engineer/Focus_on_Coal/New_technologies_reduce_environmental_impacts_of_coal-fired_plants/22603/.
The importance of this research, in my opinion, is what will keep coal very much at the center of both the power production platform, and will definitely help coal remain as the dominant factor involved in the production of steel.

It is this committed approach, by both the public and private sector, that will continue to justify the use of coal. This in turn, is what aids in the type of announcement that Premier Clark has recently made, and which I feel stands to benefit many more companies, aside from those involved in the deals she spoke of.

There is one aspect that differentiates between Compliance Energy's Raven Project, and the above mentioned coal mines, that being, the Raven Project contains a coal that would make it desirable as a blending coal that is ideally used in the production of steel. This grade of coal in turn, commands a premium price.
Compliance Energy has another factor that is very much in their favor, and that is, that their flagship operation, the Raven Project, is designed as an underground operation. Compliance Energy is looking to maintain an open communication line for people who have questions, and you can find the answers to many of the common questions they have fielded, at this link, http://www.theravenproject.ca/index.php?id=166
What I find to be of additional importance in this project, is the fact that Compliance Energy has already covered its bases in terms of off-take agreements. The two partners in the Raven project, besides Compliance Energy, are Itochu Corporation, and LG International.
 LG International is a leading general trader in Korea with worldwide branches and extensive experience in coal sales and mine development.
• Holds 20% of Comox Joint Venture
• LG is Asia’s largest coal trader
Itochu is a  major Japanese trading house with widespread experience in marketing, coal sales and the development of coal mines.

• Holds 20% of Comox Joint Venture

• 2010 annual trading of energy metals and minerals transactions accounted for US $35 billion.
Between these two partners they have agreed to purchase all coal that would be mined from the Raven deposit. This obviously leaves Compliance Energy in a position that allows them to concentrate and focus on the issues at hand currently in progressing this project towards production.

One other point I would like to cover, is the fact that while there is an abundance of coal globally, the remaining known resource deposits which contain metallurgical coal are becoming more rare. Those deposits that can be found, seem to be in more complex environments, and as such it is not uncommon that the costs associated with mining this coal are becoming increasingly higher. This again, is another positive aspect of the Raven Project, in that the coal can be produced at a relatively low cost for production.

We must sit patiently at this time, in order to see just what the effect of Premier Clark's comments will have in terms of benefit, both with the permitting, and potential progression towards the commissioning of a mine. At this time, it does give way for a very positive outlook for Compliance Energy Corp., and their plans to bring the Raven Project through the required processes, on their way to bringing Raven Project online as an operational mine. This in my opinion, would be a project that the government may want to look at as a prime candidate, in an attempt to follow through with the claim of helping companies to bring projects on line in a more expedited manner. Obviously there are limitations of just how fast a project can accelerate through the process, since there is no desire to knowingly expedite any project without full knowledge of the environmental impacts, as well as the cultural impacts.

For those who may be inclined to view Compliance Energy as a potential investment opportunity, I would strongly suggest that you do your own due diligence. A perfect starting point is the company's website, which can be found at,  http://www.complianceenergy.com/index.php?id=27.

In terms of disclosure, I have received no compensation of any kind for this post. All views herein are my own. I do own shares of Compliance Energy Corp.

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