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CanAm to curb M&A in short term: De Smedt

Keywords: Tags  CanAm Coal, metallurgical coal, thermal coal, Jos De Smedt, Stacy Irish

NEW YORK — Canada’s CanAm Coal Corp. has no plans to acquire further metallurgical coal assets in the next year, president and chief executive officer Jos De Smedt said.

The Calgary, Alberta-based company currently has metallurgical and thermal coal assets in Alabama and Colorado.

"We have no plans over the next six to 12 months to target acquisitions. (But) if the right opportunity comes along, we’ll take a look at it," De Smedt told AMM sister publication Steel First.

"There are at least three or four small companies out there that are trying to sell. They typically have 3 (million) to 10 million tons of coal reserves. The big players are not selling; they have 100-million-plus tons of coal reserves that they’re holding on to," he said.

"Obtaining financing for smaller junior mining companies is nearly impossible, which is forcing the small players to sell," De Smedt added. "Some of the companies have no cash flow or revenue and they’re desperate to divest assets or to create a joint venture."

In May 2011, CanAm acquired RAC Mining LLC, a predominantly metallurgical coal producer. Its Powhatan Mine in Jefferson County, Ala., produces 12,000 tons per month of metallurgical coal, which makes up 70 percent of its output. The remaining 30 percent is thermal coal.

It has no immediate plans to increase production at the mine, which has a production capacity of 140,000 to 200,000 tons per year of high-quality metallurgical and thermal coal.

A minimum of 3,000 tons per month of metallurgical coal has been pre-sold through one-year sales contracts at $135 per ton, according to CanAm’s website. The balance of its metallurgical coal production is sold into the local spot market at prices of $145 per ton and higher.

"We have five key customers and we’ve already committed 750,000 tons of production," De Smedt said.

"Most of it is thermal coal," he said. "We hedge our prices using long-term contracts that last until 2014. It’s a risk: if prices go down, then we benefit, but if prices go up, we lose out." 

A version of this article was first published by AMM sister publication Steel First.

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