Secret firm backs bid for Ridley Terminals

Mining officials slam Ridley sale
Peter O'Neil, Vancouver Sun, 10-Oct-2005
B.C. coal miners object to terminal plan
Peter Kennedy, Globe and Mail, 11-Oct-2005
Fortune responds to Vancouver Sun article regarding Ridley Terminals Inc.
Fortune Minerals news release, 11-Oct-2005
Secret firm backs bid for Ridley Terminals
Peter O'Neil, Vancouver Sun, 12-Oct-2005
Shippers have 'huge concern' about Ottawa's handling of coal terminal
Don Whiteley, Vancouver Sun, 12-Oct-2005
Bidder offered a fraction of Ridley's cost
Peter O'Neil, Vancouver Sun, 24-Oct-2005

COMMENT: What a wierd situation this is, in which corporations are whining to government to interfere on their behalf against other corporations. Big guys whining about little guys, no less. These are corporations which have invested a fortune, so to speak, in putting governments in place which generally march in time to the hands-off tune of these same corporations. Corporations which were upstaged by Fortune Minerals, not quite one of their own.

BC's other coal port, Westshore Terminals at Roberts Bank had revenues last year of some $127 million dollars. Net earnings were $48 million. In the first six months of 2005, revenues of the Westshore Terminals Income Trust jumped to $76 million and net earnings of $27 million. This is no penny-ante operation ekeing out a tough living. It's no wonder Teck Cominco et al want a piece of the Ridley Terminals action now that the coal business, especially, is booming in the north.

Westshore Terminals is owned by BC's own King Midas, Jim Pattison. Over 90% of Westshore's business is derived from a comfortable relationship with the "Coal Partnership" - essentially Teck Cominco, Fording (with substantial Teck Cominco ownership) and Elk Valley Coal Corporation (which is largely a Teck Cominco and Fording entity).

One might ask, however, why the federal government was okay with operating the Ridley Terminal for the years it was losing money, but feels it necessary to privatize the thing just when it looks like it is poised to make substantial profits - and on highly suspect giveaway terms.

Peter O'Neil
Vancouver Sun
Monday, October 10, 2005

CREDIT: Glenn Baglo, Vancouver Sun Files
Ridley Terminals coal-loading facility near Prince Rupert.

OTTAWA -- The federal and B.C. governments, despite touting a "Pacific Gateway" initiative to help Canada exploit booming Asian markets, are acting against the interests of Western Canadian resource exporters by planning to sell off the Ridley Terminals facility to an Ontario-based junior mining firm, says a mining industry official.

The Mining Association of B.C. said Transport Minister Jean Lapierre should take a second look at a proposal by five resource companies from Vancouver and Calgary, including mining giant Teck Cominco, to buy and operate the Ridley coal shipping facility in Prince Rupert.

Association president Michael McPhie said the coalition will ensure that Canadian shippers are charged shipping fees low enough to allow them to compete with Australian firms.

McPhie said he realizes that Lapierre is anxious to get rid of money-losing Ridley, which cost taxpayers $250 million in the early 1980s and is believed to be on the market for a tiny fraction of that price.

"But I don't think expediency should be a driver for making good or bad decisions," he said, adding that Lapierre's move contradicts political promises to make it easier for Canada to trade with China and India.

Lapierre has confirmed that Fortune Minerals Ltd., a London, Ont.-based mining firm with no revenue-producing properties, is the front-runner to acquire the Crown corporation, which he said is costing taxpayers $500,000 a month in subsidies. Fortune stresses that it has $20 million in cash and three mining properties, including one coal project in northern B.C., nearing production stage.

But a group of five resource firms based in B.C. and Alberta say the federal government should re-open bidding to allow them to buy and operate Ridley as a kind of co-operative that is focused on keeping shippers' costs down.

The group is called the Ridley Shippers Coalition and is made up of Teck Cominco, Northern Energy and Mines, and Western Canadian Coal, all based in Vancouver. Sumitomo Canada, a subsidiary of a giant Japanese firm, and Grand Cache Coal, both based in Calgary, are also part of the coalition.

Fortune president Robin Goad said Friday he will issue a news release before markets open Tuesday to confirm The Vancouver Sun's disclosure that his company, along with an unidentified corporate partner, are poised to acquire Ridley.

He ridiculed the coalition's position that the terminal should be shipping resources at below-market prices.

"It's nonsense. How many businesses operate not-for profit?" Goad said.

Goad also confirmed that he asked Lapierre to prevent Ridley management from signing long-term contracts before the sale is complete.

The unusual move by Lapierre, who had cabinet issue an order under the Financial Administration Act, was necessary because Ridley wanted to sign contracts -- and hand over some of its assets -- at below-market costs.

He said some of Ridley's putative customers were members of the same coalition trying to buy the Crown corporation.

The federal government is preparing legislation and budgeting at least $500 million as a down payment to advance the gateway concept that's aimed at improving port, road and rail infrastructure on the West Coast.

"It makes geographic sense that British Columbia become the nexus of trans-Pacific trade, the gateway to Asia," Prime Minister Paul Martin said in a speech earlier this month, echoing early statements from B.C. Premier Gordon Campbell.

"But make no mistake: the further development of the Pacific Gateway will benefit not only B.C., and not only the West, but all of Canada. Indeed, when we say that Canada is much greater than the sum of its parts, this is the kind of example we can point to."

The B.C. government said earlier this year it would consider buying Ridley, but recently wrote to Lapierre saying it is satisfied with Ottawa's plans to privatize the facility.

Lapierre said the provincial government is satisfied that a sale to Fortune wouldn't be contrary to the interests of the resource industry.

poneil1@hotmail.com

© The Vancouver Sun 2005

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By PETER KENNEDY
Globe and Mail
Tuesday, October 11, 2005

VANCOUVER -- British Columbia's mining industry is urging Ottawa to reconsider a process that could make a small Ontario company the sole operator of a B.C. shipping terminal that is emerging as a key gateway for Asia-bound coal shipments from Western Canada.

The plea comes after the federal Ministry of Transport named Fortune Minerals Ltd. of London, Ont., as the preferred bidder among the roughly 60 companies that expressed interest in buying the Ridley Island coal terminal at Prince Rupert.

B.C. Mining Association president Michael McPhie said rising coal prices and the prospect of soaring port shipments in the next few years has made Ridley a "strategically important asset" for the province's resource sector.

"Having a single operator running the terminal with a profit motive could seriously comprise access in the future," he said.

Mr. McPhie said the industry wants Ottawa to consider an alternative proposal from a coalition of northwestern coal producers, including Teck Cominco Ltd., Northern Energy and Mining Inc. and Western Canadian Coal Corp.

Ridley Terminals Inc. president Greg Slocombe agrees that Ottawa should consider the coalition's plan to run the terminal in a co-operative environment where all of the members share in the costs and the risks. "Why not put it in the hands of those who are going to own and operate it as a cost centre," Mr. Slocombe said.

By making the terminal available to the industry at large, he said Ottawa can help the Canadian coal sector compete with rivals in Australia that run their terminals as a co-operative and benefit from closer proximity to sea ports.

The controversy over ownership has arisen two years after Ottawa put the terminal up for sale. At that time, the Prince Rupert region was facing the economic consequences of its declining fishing and forestry sectors.

But because of rising coal prices and the development of new mines in B.C. and Alberta, coal shipments through Prince Rupert are expected to soar in the next few years, reaching up to eight million tonnes annually by 2008, compared with 1.3 million last year, according to Ridley Terminals estimates.

Vancouver-based Hillsborough Resources Ltd. expects to boost shipment levels after signing a preliminary deal to develop a basket of B.C. coal properties in a joint venture with the coal division of Anglo American PLC of South Africa.

"We are aghast that the federal government would consider a private company as the sole owner of that facility," Hillsborough president David Slater said.

A spokeswoman for federal Transport Minister Jean Lapierre confirmed that ministry officials are in talks with Fortune Minerals, which was named the primary bidder following a request-for-proposals process that she described as both "legal and open.'' But she said no final decision on who gets to operate the terminal will be made until the company's proposal is reviewed by a cabinet committee.

In an interview, Fortune Minerals president Robin Goad said fears that his company will limit access to the terminal, if it is allowed to buy the site, are "groundless."

"As part of our proposal we are providing guarantees to the federal and [B.C.] provincial governments that we will provide free and open access to all bulk shippers on a commercially competitive basis," he said. "We have guaranteed to maintain the facility as a bulk handling terminal with priority being given to coal."

Fortune is a junior exploration company that is developing the Mount Klappan coal project, about 300 kilometres northeast of Prince Rupert. It is one of two partners in a private company that hopes to acquire and operate the Ridley Terminal. The other partner is a yet-to-be-named B.C. firm with significant experience in shipping and handling bulk material, Mr. Goad said.

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News Release
Fortune Minerals
10/11/05

Issued Capital: 34,037,573

LONDON, ON, Oct. 11, 2005 (Canada NewsWire via COMTEX) --
Fortune Minerals Limited (TSX-FT) is responding to an article that appeared last Friday in the Vancouver Sun newspaper, which quoted federal Transport Minister, Mr. Jean Lapierre as indicating that Fortune has been selected as the primary bidder for Ridley Terminals Inc. (RTI), a Crown Corporation that owns and operates the Ridley Island coal terminal in the City of Prince Rupert, British Columbia. RTI operates on lands under lease from the Prince Rupert Port Authority, which is also a Federal Crown Corporation.

Fortune confirms that it is a shareholder of Northwest Bulk Terminals Inc. (NBTI), a private company that has submitted a proposal to Transport Canada (TC) to purchase the assets of RTI pursuant to a tendered "Request for Proposal" process. The other shareholder in NBTI is a British Columbia company with expertise in handling bulk materials. NBTI is in discussions with representatives of TC with respect to such a purchase. Completion of the proposed transaction would be subject to various conditions.

Prince Rupert has an ice-free, deepwater harbour and is the closest port in North America to Asia in terms of sailing time. It is also a western terminus for the Canadian National Railway Company. The coal terminal was built by the federal government in the 1980's to load and export coal from the past producing Quintette and Bullmoose coal mines in northeast British Columbia. The facility has an annual capacity of approximately 16 million tonnes.

NBTI has a business plan, which it believes will make the Ridley terminal profitable. The proposed acquisition presents a significant opportunity for Fortune to participate in Asian economic growth through this major conduit for Canadian sourced commodities. The terminal is located 330km southwest of the Company's Mount Klappan anthracite coal project, which was recently assessed in a positive, full feasibility study expected to be released shortly.

Fortune Minerals is a diversified natural resource company with seven mineral deposits and a number of exploration projects, all located in Canada. They include the Mount Klappan anthracite coal deposits in British Columbia, and the NICO cobalt-gold-bismuth deposit, the Sue-Dianne copper-silver deposit and other base and precious metals exploration projects in the Northwest Territories. Fortune is the managing partner of Formosa Environmental Aggregates Ltd., an industrial mineral company developing the Greenock high calcium limestone quarry in Ontario. Fortune Minerals is a company focussed on outstanding performance and growth of shareholder value through assembly and development of high quality mineral resource projects.

SOURCE: Fortune Minerals Limited

please contact: Fortune Minerals Limited: Robin Goad, President, Julian Kemp, Vice President, Jennifer Gauthier, Executive Assistant, Tel.: (519) 858-8188, Fax: (519) 858-8155, info@fortuneminerals.com, www.fortuneminerals.com; Renmark Financial Communications Inc.: John Boidman: jboidman@renmarkfinancial.com; Sylvain Laberge: slaberge@renmarkfinancial.com; Henri Perron: hperron@renmarkfinancial.com; Media:
Cynthia Lane: clane@renmarkfinancial.com, Tel.: (514) 939-3989, Fax: (514) 939-3717,
www.renmarkfinancial.com;

To request a free copy of this organization's annual report, please go to http://www.newswire.ca and click on reports@cnw.
Copyright (C) 2005 CNW Group. All rights reserved.

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OTTAWA -- An unidentified B.C. company is backing the bid by Fortune Minerals, a small Ontario resource firm with no operating revenues, to acquire the Ridley Terminals coal-shipping facility from the federal government over the objections of the B.C. mining industry, Fortune's president said Tuesday.

"This is not an east-versus-west issue, which some people are trying to make it sound like," said Robin Goad, who added that the mystery company has experience in the area but doesn't want its identity publicized.

Fortune, in a news release Tuesday confirming The Vancouver Sun's report last week that it was the lead bidder for Ridley Terminals, said it was in fact bidding for Ridley through a private company called Northwest Bulk Terminals Inc.

"The other shareholder in NBTI is a British Columbia company with expertise in handling bulk materials," Fortune said in the release.

Goad said the company is a private firm that doesn't want its identity exposed. NBTI was incorporated last December in Ontario, and lists only two individuals connected to the company, both as administrators: Goad and Fortune chairman Georges Michel Doumet, a Vancouver businessman and president of Federal White Cement Ltd., an Ontario company.

Goad would neither confirm nor deny rumours that B.C. billionaire Jim Pattison is Fortune's NBTI partner, but Doumet said the billionaire isn't a shareholder in NBTI.

"He's not involved," Doumet said.

Pattison, who publicly declared his interest in buying the Crown corporation when the federal government began seeking buyers in 2003, is already a powerful player in the increasingly lucrative coal shipping industry.

The Jim Pattison Group is sole owner of Westshore Terminals, located at Roberts Bank near Delta. Westshore is the largest coal-handling facility on the North American west coast.

Pattison, speaking through administrative secretary Maureen Chant, said Tuesday: "We don't comment on those kinds of things."

A group of resource firms based in Calgary and Vancouver, including Teck Cominco, is lobbying the federal government to reconsider the sale to Fortune, based in London, Ont., and contemplate their bid to acquire Ridley.

The group, called the Ridley Shippers Coalition, wants to run the terminal as a kind of owners' co-operative that would charge discount fees to ship coal, sulphur, wood pellets, and other bulk commodities low enough to compete with shipper- or government-owned terminals in Australia, Canada's main competitor in Asian markets.

The Mining Association of B.C. publicly questioned federal Transport Minister Jean Lapierre last week for not considering the Western Canadian coalition's bid, noting that the federal and B.C. governments are openly pushing for ways to help exporters tap into red-hot Asian economies.

Ridley's management, described by Ridley chairman Mike Tarr as "rogue" in the eyes of the federal government, has been trying to sign long-term contracts with shippers over Lapierre's objections.

The minister took the unusual step this month of using a cabinet decree to prevent Ridley from signing deals longer than 18 months.

Lapierre needs cabinet approval before he launches full-scale negotiations to sell the facility at a price believed to be a fraction of the $250 million it cost to build in the early 1980s.

poneil1@hotmail.com

© The Vancouver Sun 2005

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As the acting minister of natural resources, John McCallum, jets off to Beijing on an energy and lumber sales mission, he might want to drop in on Prince Rupert first to check out a management mess in the Ridley Island Coal Terminal.

Key to any future major sales of coal to Asian markets, this high-tech, state-of-the-art facility sits idling while Ottawa dithers over who should take it over and run it. What's worse, Transportation Minister Jean Lapierre recently issued an order preventing the current management team from signing any more contracts with shippers until the terminal's sale has been completed.

With China and others begging for coal, and coal prices at record levels, who in his right mind would stop management from doing deals? There are other potential coal suppliers in the world, and a prospective Asian buyer would move in a heartbeat if there was any whiff of turmoil over access to the coal.

As Vancouver Sun Ottawa reporter Peter O'Neil has explained in detail over the last few days, there's a very nasty catfight over the future of the facility and who will get to run it. After a bidding process that was launched three years ago, the federal government has selected a "preferred" bidder in the form of Northwest Bulk Terminals Inc. Fortune Minerals of Toronto is the only identified shareholder. Fortune has very little operating experience, but has an intriguing silent partner in this deal described only as "a British Columbia company with expertise in handling bulk materials." Jimmy Pattison maybe?

Apparently spurned in its bid to run the terminal is a shippers coalition that reads like a who's who of the mining business, including Teck Cominco, Western Canadian Coal Corp., Northern Energy and Mining Corp. -- all operating companies with oodles of experience. Backing the shippers coalition is the B.C. Mining Association, which argues that Ridley Island Coal is of such strategic importance to a number of B.C. coal producers that it shouldn't be run by one private company.

This fight will eventually result in a new owner, and whichever way it goes it should signal a new and very profitable era for a terminal that was built in the 1980s to handle the Northeast coal development, but has lost money consistently. It currently operates at only a fraction of its capacity.

But the federal government's decision to tie the hands of the current management team by prohibiting the signing of any new contracts threatens to derail the entire process.

Gary Livingstone, president of Western Canadian Coal Corp. (and a shippers coalition member), is beside himself over this move, and expressed concern over the fate now of a letter of intent he signed with Ridley for production from his company's new mine starting next July.

"The only point of that is to give a free hand to Fortune to go in there, rip up any commitments, and charge whatever they want," he said. "I recall seeing some quotes talking about the fact that the federal government admitted they directed Ridley based on a request from Fortune.

"That gives shippers like us a huge concern," he said. "We were the first ones to go through the port, and we're operating under what we believe is a long-term commitment. For them to make that statement -- we're now evaluating that to see what legal rights we have."

Livingstone said he signed a letter of intent with Ridley management a year ago and has been shipping some coal since last December.

"We're investing $300 million on a new mine we're bringing on stream next year," he said. "We're operating on the premise we have an agreement in place. If the feds do something that affects that, it will give us some very serious concerns."

Livingstone credited the current management team with doing an "outstanding job" of getting more product moving through the terminal and looking to the future. "When you read in the paper comments about 'rogue' management, it's unbelievable. To hear that from Ottawa, who are so far removed from what is happening in B.C. -- it's mindboggling."

When Fortune's silent partner is identified, it may become much clearer why Ottawa seems intent on giving the job to this small company instead of the high-powered consortium now in second place.

There is speculation that Jimmy Pattison is involved, and a Pattison spokesperson on Tuesday would neither confirm nor deny any involvement on his part. With his interest in Westshore Terminals, Pattison certainly fits Fortune's definition of a company with "expertise in handling bulk materials."

Another company mentioned as a possible partner is Salt Lake City-based Savage Companies, through its Canadian subsidiary Savage CANAC Corp. Savage operates large bulk terminals for coal, petroleum coke and sulphur in the U.S.

Savage spokesman David Wolach confirmed Savage's interest in operating the terminal, but said there was no agreement with anyone. "We've had discussions, and we're interested in participating, but nothing has been signed," he said.

But in the meantime, it seems ludicrous to handcuff an existing management team trying to drum up business for a taxpayer-owned terminal in a region of B.C. that has been depressed for more than a decade.

Ridley Terminals President Greg Slocombe says he can still accommodate growth and expansion in coal shipments on a spot basis, despite the handcuffs. But his ability to go after bulk commodities other than coal have been seriously impacted. That makes no sense whatsoever from a business perspective.

don_whiteley@telus.net

© The Vancouver Sun 2005

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