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Issue link: https://coal.epubxp.com/i/174138
news continued September. "I think our success in selling those is primarily a function of how people see the forward market. We need some money to fund our Utica expansion and to fund Pennyrile. We will not give any of our assets away." Rhino is not aggressively pursuing a sale of its idled assets, "but our aggressiveness really depends on our need to fund Pennyrile and Utica until it becomes cash positive," he continued. "Utica is several million dollars away from being cash positive and Pennyrile will be a drain until it comes into production next year." Vectren Looking to Increase Sales With operations at both of its Oaktown underground steam coal mines finally in full swing in southern Indiana, Vectren Corp. expects to lower its production costs and pick up additional sales before the end of 2013. The startup of the Oaktown No. 2 mine in Knox County earlier this year helped the Evansville, Ind.-based company's Vectren Fuels subsidiary to produce 1.5 million tons in the second quarter, keeping it on target to turn out 6.5 million tons this year. In addition to the Oaktown mines, Vectren also operates the Prosperity deep mine in Pike County, Ind. The increased output did not enable Vectren's coal mining division to post a profit in the April-June period, however. Coal mining operations swung to a $3.7 million loss after posting a profit of $2.5 million a year earlier. Vectren blamed the earnings reversal on continued higher production costs associated with a thin high-sulfur coal seam and other unfavorable mining conditions at Prosperity. Quarterly results also reflected reduced pricing for customers related to contracts that had price reopener clauses during 2012 as well as the overall softness in the coal market. In an early August phone conference with analysts to discuss quarterly earnings, Vectren officials voiced optimism that the company was turning the corner on mine production costs. "We should see improvement through the remainder of 2013 as our low-cost Oaktown mines ramp up production and with continued improvements at Prosperity," said Carl Chapman, Vectren chairman, president and CEO. Both of Oaktown 2's continuous miner units are "super sections and are prepared for full production," he said. "We clearly have some ramp-up that is continuing. We believe our cost structure will continue to improve throughout the year." Jerry Benkert, Vectren executive vice president and chief financial officer, said Oaktown 2's costs "should be similar to Oaktown 1 as it reaches full production later this year." Once that happens, and with smoother sailing at Prosperity, the coal mining division is expected to return to profitability. Oaktown 1 went into production nearly three years ago. At Prosperity, whose unfavorable geology has caused the company headaches for the past couple of years, seams were "somewhat thicker" in the second quarter. "Cost issues have been going on for a while" at the mine, Chapman conceded. "We are disappointed. The mine has a thin seam." Vectren is attempting to improve the situation by adding lowprofile mining equipment at Prosperity. "The first round arrived earlier this year," Chapman said, and the second round of equipment was scheduled to be installed before the end of August. "We're hopeful changes we made will improve the costs." 18 www.coalage.com Before the end of this year, Vectren hopes to secure sales contracts for an additional 1.2 million to 1.6 million tons for 2014. That would increase the company's sales commitments for next year to 80-85% of anticipated production. Coal stockpiles at U.S. electric utilities are slowing decreasing, Benkert said, although some utilities still are hesitant to book new coal sales. Nevertheless, he said Vectren "sees opportunities for volumes that would easily exceed projected sales for 2014. We expect a higher percentage of sales from Oaktown next year, which should reduce total average costs per ton." And that "will lead to significantly improved coal mining results in 2014 and beyond." Argus Launches New 12,000 BTU Central Appalachian Rail Coal Assessment Argus has launched a new Central Appalachian rail coal assessment for 12,000 Btu/lb CSX-originated coal. The new assessment has higher ash and lower heat than earlier specifications, better representing actual coal production in the region, according to Argus. The new assessment will be published weekly on Fridays in Argus Coal Daily and assesses CSX-originated coal with 12,000 Btu/lb; 14pc typical ash (14.5pc reject) delivered fob railcar in the CSX Big Sandy and Kanawha rate districts. DOI Proposes Changes to Coal Lease Terms, Bonds & Fees The Bureau of Land Management (BLM) and Office of Natural Resources Revenue (ONRR) published long-anticipated rules to implement coal leasing provisions of the Energy Policy Act of 2005 that were designed to encourage greater coal production on federal lands. The BLM rule would implement the act's provisions that relate to repealing certain acreage limitations; establishing criteria for logical mining units; clarifying provisions for payment of advance royalties; and eliminating financial assurance requirements for bonus bids. The ONRR proposal focuses on regulations that would govern valuation of coal for advance royalty purposes. The proposed rules also address issues outside of the 2005 legislation. For example, the BLM rule would clarify distinctions between underground and surface coal leases for the purpose of levying royalties. The proposal noted in recent years "much dialogue has taken place concerning whether various hybrid technologies for mining coal, specifically continuous high wall mining and auger mining, constitute underground mining or surface mining," said the agency. In the proposed rule, underground mine is defined as those in which "undisturbed earth is directly overhead" together with a roof control ventilation plan approved by the Mine Safety and Health Administration. Under the proposal, only mines meeting the definition will be eligible for the 8% underground royalty rate; the minimum 12.5% royalty rate will apply to coal recovered by any other extraction method. In addition, the ONNR rule proposes extensive new information requirements not directly related to implementation of the 2005 legislation. Comments on the proposed rules are due Oct. 11. September 2013