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Western Canadian Coal is
focused on low cost, long-term production of coals used in the production of steel
Energy
Coal
(WTN-TSX, WTN-AIM)
Western Canadian Coal Corp.
900-580 Hornsby Street
Vancouver, B.C. V6C 3B6
Phone: 604-608-2692
Gary Livingstone
President and CEO
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
August 25, 2005
BIO:
Gary K. Livingstone
President and CEO of Western Canadian Coal Corp.
Gary Livingstone was appointed President and CEO and director of Western Canadian Coal in
the Spring of 2004.
From 1993 to 2004, Mr. Livingstone was President and CEO of the Mining Association of
British Columbia, representing the collective interests of some 40 member companies,
several of whom are world leaders in coal mine development and operation.
Mr. Livingstone is a professional engineer (mining)
with an extensive record of accomplishment in the coal industry. He was President of
Westar Mining Ltd.; President of Alberta-based Luscar Ltd. and Kentucky-based Andalex
Resources.
Company Profile:
Western Canadian Coal Corp. currently has two groups of coal properties under exploration
and development planning in British Columbia: Wolverine and Brazion. The Company is
focused on development and production for the international markets of 5 million
tonnes of coal per year by 2009, comprising 2 Mt/annum of ULV-PCI coal from the Brazion
group and 3 Mt/annum of hard coking coal from the Wolverine group. Additionally,
WCCC holds a 50% interest in the Belcourt Saxon Coal Limited Partnership formed to further
develop the Belcourt and Saxon group of coal properties in Northeast British Columbia.
CEOCFO: Mr. Livingstone,
what attracted you to Western Canadian and how has the company changed under your
leadership?
Mr. Livingstone: “I was attracted by the potential for
coal development in the northeast part of British Columbia. I spent most of my career in
the southeast part of the Province of B.C.; in fact I was involved with the first major
new generation coal production in the southeast in the early seventies. The opportunity to
be involved in the rebirth of the coal production in the northeastern part of the province
was a real enticement to me.”
CEOCFO: What has
happened in the year you have been CEO?
Mr. Livingstone: “Much has happened. We have been listed
on the London Stock Exchange and we have just been uplifted to the main board on the
Toronto Stock Exchange. Our company started production in December of last year (2004). We
are producing at the rate of 60,000 tonnes of coal a month. We are looking to increase
that to produce about 800,000 tonnes this fiscal year. We started construction on our $200
million Wolverine project in April of this year. That is progressing well and we are
looking at first production in the latter part of 2006. We are well on our way to meeting
our goal. We should be doing about 800 thousand tonnes next year and that will grow to
well over two million tonnes. The following year we will be close to four million tonnes
and then the following year we will hit five. We have assembled a top quality team of
professionals that will be responsible for achieving this. We feel very optimistic of
where we are going in the future.”
CEOCFO: Why is there an
interest in coal now and why in the northeast?
Mr. Livingstone: “The renewed interest in coal is from
development in China where China has become a net importer of coal. The coal we produce is
used in the manufacture of steel. With China becoming a net importer of coal, it has
changed the market dynamics. In addition to China, you have seen world economies in
general continue to grow. In Japan production is getting close to an all time high and in
India it is just starting to develop. You see many countries that are increasing their
standard of living and in doing so, require more steel to develop their economy. The
demand for the product has taken off and it has been exacerbated by the fact that in the
two previous decades, very little investment was made in the development of new coal
production. Those two factors have contributed to this demand being much greater than the
supply. We see this growth carrying on for at least the next two to four years, when
supply is forecast to catch up with demand. We believe the increasing demand will continue
in the long term. A significant portion of new production will come from greenfield
sites where significant infrastructure investment will be required, requiring a pricing
environment that will be very attractive to low cost producers who do not require
significant infrastructure investment.
With respect to northeast BC coal, that is one of the few places in the world, which has
underutilized infrastructure. We have a port at Prince Rupert called Ridley Terminals; it
has a capacity of 16 million tonnes a year of coal output. Right now we are the only
shipper going through there and by the end of the year, there will be two more coal
shippers going through the port. That is a real advantage. We have a rail system that
currently handles about six trains a day and has the capacity of fifteen trains a day. We
have a community right beside our operations, which has all the amenities including golf
course, swimming pool, etc., and can house our employees. We have a government in this
province, which is very supportive of resource development. We have a lot of support to
move ahead with these investments. That is the reason why northeast coal is looking so
attractive.”
CEOCFO: What do you need
to do to get increased production?
Mr. Livingstone: “Essentially we have to wisely spend
the money that we have and build the facility. We are in the process of selecting the
contractor to build the preparation plant, so that is a key ingredient because it is on
the critical path to get our production out. Steel mills around the world are giving us
support as we push forward. When we combine the financial resources that we have and with
the people we have with outstanding coal assets that we have, plus the strong incentive by
the customer, all of that bodes extremely well for us meeting our objectives.”
CEOCFO: Do you sell the
coal outright?
Mr. Livingstone: “The coal market does not lend itself
to hedging like precious metals. Essentially coal is sold through annual or longer-term
contracts, which stipulate a volume. For example, you can have a three or five-year
contract and the steel mill will say “I will take X amount of tonnes of coal on an
annual basis from you, but the price would be set normally on an annual basis.”
CEOCFO: What is the
financial picture at Western Canadian?
Mr. Livingstone: “We have about a $100 million in the
bank and no debt, and we have cash flow coming from our Dillon mine. We are optimistic
that we will be able to develop our projects without having to go back to the equity
market. A key part of that is while these prices are at record levels to bring on products
as quickly as possible. That is why we are going to do everything possible to advance our
production plan and take advantage of these prices to enhance our cash flow and
essentially get these mines up and running and minimize our debt. We believe we are in a
fortunate position to be able to do that.”
CEOCFO: Are there new
technologies available?
Mr. Livingstone: “Essentially, the new technologies are
primarily related to the equipment you get. As new equipment is developed, you get higher
productivity, lower cost and more refinement in the equipment. That is primarily the
technology change that we would have. We will take advantage of the refinements and
overall technology with respect to the mining and transportation of the product.”
CEOCFO: Are you looking
some joint properties?
Mr. Livingstone: “At this point, our focus is getting
production from our existing properties. We do have a joint venture with another mining
company in the area. This is a 50/50 joint venture with a very large coal resource that is
100 kilometers southeast of where our existing operations are. We are in the process of
completing a pre-feasibility study, which will be completed by the third quarter of next
year. We are optimistic that this could be the next phase of coal production for us. It is
a large resource in the range of 300 million tonnes. If our drilling substantiates what we
believe we do have, then this operation could sustain eight or nine million tonnes a year
of coal production.”
CEOCFO: Environmentally
and socially responsible mining is a focus for you; what are the challenges there?
Mr. Livingstone: “In British Columbia we have some of
the most stringent environmental regulations in the world and we are proud to be able to
operate here and be able to conform to those regulations. We have a very good working
relationship with the government. We have a very strong staff that we put in place that is
only focused on environmental protection. This staff is guiding the development and
operation of our mines in close cooperation with the government and local community. That
is the key; being able to communicate and have a transparent relationship with your
stakeholders. In addition, we have First Nations in our area and we have signed
cooperation agreements; with three of the larger groups in the area and we are continuing
to work with others. Our objective is to provide as much employment as we can for the
indigenous people in the local area. It is essentially an attitude of being a good
corporate citizen; we take that very seriously and work very hard at trying to work
cooperatively with the people in the area.”
CEOCFO: Is reaching the
investment community a focus for you?
Mr. Livingstone: “It is, and perhaps it is an area where
we should be doing a better job. I am not sure that people understand the
outstanding potential that our company can present investors. We are doing road shows and
interviews like this to reach the broader investment community. As time goes on, we will
continue to do a better job. Our next quarterly results, we will have a phone hooked up to
answer questions from analysts and investors. We will be continuing to improve our
relationship with the investors community as we move forward.”
CEOCFO: What challenges
do you see ahead?
Mr. Livingstone: “I think the challenge is to stay
focused and move forward with the plan. A key part of that is having a strong and
dedicated management team that will drive the operations forward. To me that is the key;
you can have all the money and resources in the world but if you do not have the right
people on-board to make it happen, it just won’t.”
CEOCFO: Why should
potential investors be interested?
Mr. Livingstone: “The objective of the company is to
look at the long-term. We are putting into play long-term assets. We are developing these
mines initially for ten-year lives and we have significant additional resources in the
surrounding areas. Over the next two or three years we are looking at building up another
eight to ten years of additional reserves. Our focus is low cost, long-term production of
metallurgical coals used in the production of steel. When you look where the world is
going, particularly China and India and how they are developing their infrastructure and
how they are increasing their standard of living for their people, steel is going to be an
integral part of that process. I believe that when investors look at our company, they
will see a long-term, high-quality asset, which is going to be feeding a growth area in
the world which I believe will be continuing to grow in the foreseeable future. I think it
is a great investment opportunity for someone looking at the longer term with respect to
their investment dollars.”
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