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Compliance Energy Corporation is an emerging Canadian coal mining company
engaged in the development of coal resources in British Columbia with a number of
very promising early stage projects, and also has plans of become an independent power
producer in the near future
Energy
Coal
(TSXV-CEC)
Compliance Energy Corporation
885 Dunsmuir Street, Suite 584
Vancouver, BC Canada V6C 1N5
604-689-0489
JC. ( Jim) O’Rourke, P. Eng.
President and CEO
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
February 24, 2005
BIO:
JC. (Jim) O’Rourke, P. Eng.
President and CEO
Mr. 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.
Company Profile:
Compliance Energy Corporation ("Compliance") is a Canadian coal mining
company engaged in the development of the coal resources in British Columbia with a
number of very promising early stage projects, and has plans of become an independent
power producer in the near future
Compliance is headquartered in Vancouver, British Columbia and its
common shares trade on the TSX Venture Exchange under the symbol CEC.
The primary objective of Compliance is to deliver superior financial
growth in the coal and energy sectors for our shareholders. We also believe in
responsible stewardship and manage Compliance with the utmost integrity based upon the
practice of providing plain, true and clear information to our shareholders. The diversity
and depth of our Management and Board of Directors, and Advisory Board provides Compliance
with expertise and focus that is expected to result in higher value for our
shareholders.
CEOCFOinterviews: Mr.
O’Rourke, will you tell us about your background with Compliance?
Mr. O’Rourke: “We started as a private company in
2001. We took on the Basin Coal project and developed it through feasibility studies as a
private company. We then signed a joint venture agreement with Nissho Iwai, a major
trading company out of Japan, who funded the development and the wash plant facilities. We
constructed it and last year was our first year of supplying our customers. The prior year
we did some test shipments to them and obtained their acceptability of our product. When
we did the joint venture with Nissho Iwai in 2002, we became listed as a new public
company.”
CEOCFOinterviews: What are you
doing and where are you doing it?
Mr. O’Rourke: “We have four areas of focus. Number
one is the Basin Coal Project, which is near Princeton, B.C. This is an operating open pit
coal mine with a large resource; the BC government reported a 240 million ton resource. We
are presently mining on the western flank a ten million ton initial Pit, with a low strip
ratio. We have a wash plant, which has the processing capacity of about 400 thousand
tonnes per year. At the site, the area has good exploration potential to extend the Pit
along STRIKE. We have a large supply of coal there. In addition, we have the coalbed
methane rights to the basin coal project. These rights are in a joint venture with the
local Indian Band.
Our second area of focus is also at the basin coal area and is
the development of a 49-megawatt wood waste / coal powered plant. We have a unique
situation in that we have secured a former minesite, which has significant infrastructure
and the power line connections in place to significantly reduce the capital costs for this
power plant. Coal for the plant would be supplied from our basin coal mine.
Thirdly the company has secured holdings on Vancouver Island,
where we have a metallurgical coal project named the Bear. This project has a drilled
resource of about 28.6 millions tons of which about 8.6 would be open pit mineable. That
project is in the development phase.. We are currently looking to define in more detail
the open pit area and we plan to start trenching and doing our development work early this
year. We are hoping we can do test shipments to potential customers and develop markets to
move the Bear project forward. We plan to have a feasibility study completed on the Bear
metallurgical coal project by the end of this year.
Lastly, we have another interest on Vancouver Island in a
developed thermal coal deposit of about two million tons. This project is readily
accessible to the ocean and facilities that could service customers on the
coastline.”
CEOCFOinterviews: What are the
advantages of coal mining in the geographical areas you have chosen?
Mr. O’Rourke: “The main advantage is that we have
the deposits and assets. The metallurgical coal on Vancouver Island is relatively close to
tidewater and a port and that is very significant. With the upswing in the prices for
metallurgical coal in recent months, this makes an attractive potential project.”
CEOCFOinterviews: What are you
doing that is different?
Mr. O’Rourke: “We are a small growth orientated
company with little overhead. We have managed to put together an extremely experienced and
strong team with an entrepreneurial approach. We do have extensive open pit mining
experience and many years of successful operation within the group.”
CEOCFOinterviews: Who is buying
your coal?
Mr. O’Rourke: “From the basin project, we are
selling to cement companies. We have one cement company quite close to us and then the
others are on the coast. The local Pacific Northwest Coal market is somewhere around
700,000 tons a year. Also on the coast, we are looking to export coal to the Far
East.”
CEOCFOinterviews: What is demand
like there?
Mr. O’Rourke: “The demand for both thermal and
metallurgical coal has been very strong. In the past year, there has been a big shift and
prices have reflected that. The metallurgical coal has bounced from the $70 dollars per
tonne range to $125 dollars per tonne. Thermal coal has gone from the $40 dollar to the
$50 dollar per tonne range. There have been strong demand and some very attractive
increased prices.”
CEOCFOinterviews: There is often
cyclicality in the price of coal. How do you take that into account?
Mr. O’Rourke: “Definitely, historically there has
been some downturn in the coal market. Both of our operations we see as being open pit
operations and very cost competitive. The markets themselves, I do not know what
peoples’ views are on the expansion in Asia but it seems that China and India have an
extremely strong appetite for the near future for both thermal coal and metallurgical
coal. We do not see a big downturn in the near future. It takes time for new projects to
be developed to production. The demand is there and growing at a greater rate than new
coal can be developed.”
CEOCFOinterviews: What are the
advantages of partnering with a Japanese company?
Mr. O’Rourke: “Initially, we started as a private
company and went public. At the time, the big advantage was that they funded the capital
expenditures and decreased the capital needs that we require from equity markets, which
was better for our shareholders.”
CEOCFOinterviews: What is your
financial condition now?
Mr. O’Rourke: “We continue with the Japanese
partner, so it is a joint venture where we are both fund our proportionate share. We have
done some equity funding and are in the process of completing a $5 million dollar private
placement. We do the minimum amount and utilize some debt financing to ensure we meet our
objective.”
CEOCFOinterviews: Is there
additional infrastructure that you need to put in place?
Mr. O’Rourke: “At our basin coal project, we have
the infrastructure. We have just finished purchasing a fleet of mining equipment including
three rock trucks, bulldozers, loaders and support equipment. We have all that in place.
With regards to the metallurgical coal project on Vancouver Island, it is in the
development and evaluation stage. We will need capital to develop that project.”
CEOCFOinterviews: Why should
potential investors look at Compliance as opposed to some of the other companies around?
Mr. O’Rourke: “I think the main advantage is that
Compliance has recently developed a coal mine operation and we are shipping processed
coal. In comparison to our peers, our market capitalization is relatively low in terms of
our resource and production. We are probably about one tenth of some of the peers’
market capitalization, thus leaving room for capital appreciation."
CEOCFOinterviews: What challenges
do you see ahead and how are you ready?
Mr. O’Rourke: “We are depending on the
metallurgical project turning out the way that it is projected to and in advancing our
power plant. We are also dependent on sales for the power and sales for coal from the
metallurgical and thermal operation. Our main challenge is securing sales to meet our
objectives.”
CEOCFOinterviews: In closing, is
reaching potential investors a focus for you?
Mr. O’Rourke: “Definitely yes, we would like to
have a strong investor base to join us as we develop the company. Our intention is to grow
the company. All of the staff here are shareholders in it. We would like to see other
people come along with us and grow with us.”
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