Lack of coal buyer stalls mine

The lack of a buyer for coal is stalling the development of Cape Breton's Donkin mine.

An official with Xstrata Coal said the company is ready and willing to begin an exploratory mining operation, but it cannot do so until it finds a buyer for the ore.

Project manager Val Istomin updated a crowd of about 80 people Thursday night in Donkin.

"Until such time that we can move the coal that comes out as a result of this exploration work, we really shouldn't start it because obviously we don't want to stockpile a million tonnes of coal," Istomin said.

Istomin said it makes sense to sell coal to Nova Scotia Power. However, the power company must meet new emission standards, and Donkin coal would be raw and unwashed at this stage.

Cape Breton West MLA Alfie MacLeod, who represents the area, said he has asked the provincial government for an exemption from the rules for four years.

This way, he said, the region can benefit economically and gain at least 270 new jobs.

"If this project moves forward, you are then going to have a project worth somewhere between $600 million and $800 million for a full-scale mine, with the development of a rail line between here and Sydney," said MacLeod.

Istomin expects Xstrata will find a buyer for the coal eventually. Even so, he said there are other factors slowing down the project, such as a slumping U.S. market for power and falling gas prices.

"Many of these utilities have the ability to switch from coal to gas or oil, and with the depressed gas prices at the moment those utilities that can burn gas are burning gas because it's the cheapest source of energy they can purpose, which means they're not purchasing coal," said Istomin.

He said Xstrata will evaluate the project in the first quarter of the new year.

Devco, the former federal Crown corporation, developed the Donkin mine through the 1980s, drilling tunnels at a cost of about $100 million. The project was abandoned when the price of coal fell, and the tunnels were flooded and sealed.