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Issue link: https://coal.epubxp.com/i/105148
southern coal continued ground mines. Southern Coal was investing $10 million at both underground mines (the Imboden and the Taggart Marker mines). New equipment has being brought into service at A&G; Job No. 21. The company had also purchased some assets from National Coal and were combining them with its Premium Coal subsidiary in Tennessee. The strategy moving forward was to fill thermal contracts from Premium and divert more of A&G;'s production to the met market. At the time met coal prices were high. Some steel mills were paying more than $300/ton for the best quality coal. The situation was healthy, but not perfect. Appalachian coal operators were having trouble moving coal to and through the East Coast ports. Southern Coal was considering its options as far as moving coal through Mobile or possibly New Orleans. The market, however, would turn against coal operators and the mean season of 2012 began. Jay Justice remembers the situation all too well. "We were on target for 8.5 million tpy in 2011, but it didn't happen," Justice said. Speaking in the boardroom of Southern Coal's modest, new head- quarters in downtown Roanoke, he explained how the company had "some issues with a customer not performing," which forced them to slow production drastically. By the third and fourth quarters of 2011, Southern Coal was applying the brakes because of market conditions. In 2012, the company would produce a little more than 5 million tons. "We scaled back operations substantially in two big cuts, that took place in January and March of 2012," Justice said. "These were market-driven decisions. Prior to that, we had employed 1,300 miners and, when we announced recently that we were going to start rehiring, we had cut the workforce back to 650. We had hoped they would be temporary layoffs and now fortunately that is the case." The cut backs were an across the board approach for Southern Coal. Almost all of the mines suffered. "We shut down mines and eliminated shifts at others," Justice said. "We reduced hours. From March 2012, we were operating at a 5 million tpy pace. It's very difficult to cut the operations from 8 million to 5 million tons and maintain efficiencies. We took other measures to help with fixed costs. We sold some equipment at two equipment auctions. We have done what we can to reduce overhead." In November, Southern Coal announced it had signed a long-term agreement with AEP. "For the last 90 days, we have been working around the clock with AEP predominantly, and other utilities, to secure what we refer to as our anchor steam business," Justice said. "We successfully negotiated a multiyear contract with AEP for 2.5 million tpy. That coal is being sourced from West Virginia, Kentucky and Virginia. That stabilized the steam side of our business." Considering that AEP will burn approximately 50 million tpy, the agreement represented 5% of its burn, but nearly 50% of Southern Coal's steam business. In 2013, Southern Coal hopes to produce 9 million tons, half met and half steam. So the AEP transaction represents the lion's share of the steam production. "We have other agreements with other utilities, so all of our steam tons are sold for 2013," Justice said. On the met side, of that 4.5 million tons, Southern Coal has a 1-million-tpy contract with ThyssenKrupp, one of the leading German steelmakers. "That con- An aerial view of the Bevins Branch mine shows loaders scooping up coal on top of the ridge (left) while a loader-truck spread works the same ridge (right). January 2013 www.coalage.com 31