Canada's Morien Resources is heading up a group of investors and coal buyers in talks with Xstrata Coal about buying its 75% stake in the $500 million Donkin coal project in Nova Scotia, a source close to the situation said Monday.
The source said details on the identity of the other partners in the investment group were not available as yet.
Xstrata announced nearly a year ago it was selling its majority interest in Donkin because the coking and steam coal project, while attractive, did not fit its strategy.
After Xstrata failed to meet its target of divesting its Donkin ownership by the end of 2012, apparently because of a downturn in the global coal market, Morien stepped forward.
Morien holds the remaining 25% stake in Donkin, which it acquired when it was spun off from Erdene Resource Development late last year.
"From the beginning, we have been looking at a strategy to cover all options, including acting on our own or acquiring the interest from Xstrata," Ken MacDonald, vice president of business strategy and chief financial officer for Erdene and a Morien executive, said Monday. MacDonald was not the source of the details about the investment group.
MacDonald said Morien hopes to reach an agreement with Xstrata soon. "Our timetable is as soon as possible, but unfortunately we're at [Xstrata's] mercy. From where we sit, the sooner the better," he added.
Xstrata officials could not be reached for comment.
If Xstrata finds another buyer for the 75% stake, Morien has a 60-day right of first refusal.
Donkin is planned as a 3.6 million st/year underground mine on the Atlantic Ocean in Cape Breton in northeast Nova Scotia.
Morien is believed to be interested in selling Donkin's coking coal to Europe, or possibly even Asia. Morien hopes to sell Donkin's steam coal to NB Power, formerly known as New Brunswick Power.
Company officials say Xstrata's delay in selling its share of Donkin has not yet caused any problems for the mine's development timetable. But that could change if the sale process drags on well into 2013.
Morien wants to start production by May 1, 2015.