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Issue link: https://coal.epubxp.com/i/123548
news continued Illinois Basin Update Hallador Receives a Double Dose of Good News Hallador Energy through its Sunrise Coal subsidiary, is doing its part to grow output and sales in both Illinois and neighboring Indiana during a difficult time for the U.S. coal industry. In the first quarter of 2013, Hallador received a double dose of good news when an Illinois community reversed course and agreed to supply potable water and sewer service for the new Bulldog underground mine in the southwestern corner of Vermilion County. Bulldog, a planned continuous miner operation, is not far from Hallador's existing Carlisle deep mine just across the Indiana border in Sullivan County, Ind. Hallador also was preparing this spring to begin producing lower-sulfur coal from its newest mine, the Ace-in-the-Hole strip job, in Clay County, Ind. Hallador President Brent Bilsland had insisted a February decision by the Homer Village Board to reject the water/sewer contract for Bulldog was not a killer for the project. If need be, he said after the vote, the company would supply its own water/sewer service for the mine. But that turned out not to be necessary when the village board did a 180° a month later and voted to enter into a contract with Hallador/Sunrise. Bilsland said the mine enjoyed and appreciated the support of most local residents all along, but was not surprised by the about face. Unlike most coal mines in Illinois, Bulldog is close to Champaign County, home of the University of Illinois. Illinois coal industry officials said that close proximity to college environmental groups most likely accounted for early opposition to the mine. Hallador expects to spend the remainder of this year acquiring required regulatory approvals for the mine. Construction is pegged to start in 2014, with the mine producing coal in 2015. Once in peak production, Bulldog could turn out as much as 3.5 million tons of high-sulfur coal annually. That's just slightly more than Carlisle, also a continuous miner operation. After the mine's production fell slightly to about 3 million tons in 2012, a year when a couple of Hallador's customers asked the company to store coal for them for a while because of reduced burns, it is projected to bounce back to 3.3 million or 3.4 million tons in 2013. Historically, Carlisle has guaranteed a 6 lb/SO2 product, supplying electric utilities with scrubbed power plants. But Ace-in-the-Hole, 10 www.coalage.com whose coal is in the 2 lb/SO2 range, is intended to provide new market opportunities for the company. Blending some Ace-in-the-Hole coal with Carlisle's will enable Hallador to ensure a midsulfur product the company believes will command a higher price. Few mines in the IB have the ability to offer their customers various ranges of SO2, Hallador says. Hallador told the U.S. Securities and Exchange Commission in early 2013 it had contracted to sell 3.2 million tons at an average price of $40.49/ton this year, and 1.7 million tons at an average price of $45.01/ton in 2014. Lily Group's Landree Mine Ships Coal With sufficient funding finally locked up, Lily Group's Landree underground mine in southern Indiana shipped a trainload of coal to Indianapolis Power & Light in late March. The company plans to bump that up to two trains a month by May. "Being a startup mine right now, we can only make 17-ft cuts before we have to tram the miner to another location," said Ron Hutchcraft, president of VHGI Coal, Lily's parent company. "This reduces production quite a bit. Hopefully, in the near future this length can be increased to around 35 ft." Lily has recalled several dozen miners to the continuous miner operation in Greene County. The company is contracted to produce and ship a minimum of 180,000 tons this year to IP&L;, an AES Corp. subsidiary, at a contract price of $61/ton. "With our funding in place, we have accelerated the pace of development with the hiring of additional personnel, bringing our total work force to 66 employees," said Rick Risinger, CEO, VHGI Holdings. According to Hutchcraft, the company is awaiting final approval of a plan by the Mine Safety and Health Administration that would "accelerate our efforts into getting into the first panel. Until we receive the approval we are mining in mains." Lily/VHGI is expecting approval this spring. Hutchcraft said Landree's No. 4 seam coal is "sold out this year." The No. 4 seam contains some of the lowest-sulfur coal in Indiana—under 2 lb/SO2, and is considered compliance coal. Once a second continuous miner unit is added, Landree's production is expected to grow to 500,000 to 600,000 tons annually. Oxford Will Likely Reduce ILB Production Oxford Resource Partners, after suspending a cash distribution on both its common and subordinated units in the fourth quarter of 2012 and missing a required U.S. Securities and Exchange Commission filing requirement on March 18, planned to finally report its fourth quarter and full year 2012 financial results in early April. The Columbus, Ohio-based steam coal producer told the SEC it expected to report a net loss of $26.1 million in 2012, deepening from a loss of $8.3 million in 2011. Oxford said the increase in the net loss primarily was due to lower sales volumes resulting from decreased production from the company's Illinois Basin operations and the related impairment and restructuring expenses. Adjusted EBITDA was expected to be $47.9 million for 2012, compared with adjusted EBITDA of $58.8 million for 2011, Oxford added. About three years ago, Oxford began branching out from its traditional base of operations in Ohio's Northern Appalachia to western Kentucky, where it opened several high-sulfur surface mines. In February 2012, however, Big Rivers Electric Corp., a Henderson, Ky.-based generation and transmission co-op, threw a major kink in Oxford's IB expansion plans when it abruptly terminated a coal supply agreement that was to have run through 2015. Oxford responded by filing a breach of contract suit against Big Rivers in Ohio County Circuit Court in Hartford, Ky. Oxford said Big Rivers' decision could result in as much as $20 million in damages. The contract cancellation caused Oxford to close the Briar Hill surface mine and reduce operations at the Rose France surface mine, both in Muhlenberg County. In January, Oxford, which went public in the U.S. in 2010, told the SEC that continued weakness in coal markets was responsible for its decision to suspend cash distributions on both its common and subordinated units in the fourth quarter of 2012 to further preserve liquidity. The company also said it planned to refinance its credit facility. More than two months later, Oxford cited its continuing efforts to get lenders to extend the terms of its existing credit facility for its failure to meet the SEC's reporting deadline. The company had until April 2 before it was in technical violation of the federal agency's rules, and Brad Harris, Oxford senior vice president, CFO and treasurer, expressed confidence it would avoid the violation. April 2013