Coal Age

DEC 2014

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Light Co., an AES Corp. subsidiary; and Northern Indiana Public Service Co., a subsidiary of NiSource Inc. Sunrise also delivers coal to three unidentified Florida utilities. Hallador told the SEC it anticipates increasing demand for high- sulfur Illinois Basin (IB) coal, noting IB coal is expected to grow at a rate faster than overall U.S. coal demand because it has a higher heating content than Powder River Basin (PRB) coal and lower cost structure than Central Appalachian (CAPP) coal. "Many utilities are scrubbing to meet emission requirements beyond just sulfur compliance," the company said, "even utilities that burn exclusively PRB. Once scrubbed, those utilities are usually capable of burning IB coal. It is this trend of new scrubber installa- tions coupled with rising CAPP cost structure that is leading to increased switching from CAPP coal to IB coal. Some fuel switching will also occur from PRB to IB in newly scrubbed utilities located near IB coal supply." Entire Amfire Workforce Headed for Layoff Ahead of the sale of its Amfire division to Pennsylvania producer Rosebud Mining, Alpha Natural Resources said that all of Amfire's 412 workers will be laid off by the end of the year and will need to reapply for their positions. The Virginia-based miner issued notice of the pending layoffs via a Worker Adjustment and Retraining Notification Act (WARN) notice, noting they will become effective December 29. "This is an asset sale. In an asset sale, versus a stock sale, the employees don't go with the assets of the company; they apply for jobs, or reapply for their current jobs, with the new employer," Alpha spokesman Steve Hawkins told Coal Age. "Amfire issued a WARN notice because the company is selling the assets and will no longer have the jobs that go with the assets available." Alpha confirmed its plans to divest Amfire, including its six underground and six surface mines as well as five associated facili- ties, in October. The $86 million transaction is expected to close by the end of the year. Amfire's production through September, the end of the third quarter, was approximately 1.7 million tons, including 1.2 million tons of metallurgical coal. Rosebud has so far not publicly com- mented on the transaction or the personnel layoff plans. Armstrong Energy Closing Kentucky Mine in 2015 Kentucky-based Armstrong Energy has confirmed that it will close its Lewis Creek underground thermal operation in Kentucky in the spring due to ongoing geological problems. The company, which inserted the news into its quarterly financial report released November 13, said that the Ohio County mine, which extracts from the West Kentucky No. 9 seam, has experienced "significant operat- ing inefficiencies" since July 2013 because of geological conditions in the reserve it has been mining. "As a result of the ongoing mining difficulties, a final decision was made during the third quarter of 2014 not to continue advanc- ing under the current mine plan, but rather to retreat and mine only in the eastern portion of the reserve," officials said in the report, adding that, as a result of the change, it opted to accelerate the depreciation of the remaining net book value of the capitalized costs associated with the development of the mine as it has been in production just two years. Armstrong outlined the net book value of the asset as about $9.2 million (as of September 30, the end of its third quarter), a figure that will continue to be depreciated using the units of production method over the remaining estimated recoverable reserves; it recorded $3 million in additional depreciation from Lewis Creek in the third financial period alone. The remaining section should be mined out sometime in the first quarter of 2015, the producer said. At that time, the existing portal will be abandoned and all of the employees and equipment will be relocated to other Armstrong mining operations. Armstrong, which is projecting 9.7 million tons in coal sales next year, is currently developing another underground operation at its Parkway complex in Muhlenberg County. That operation is expect- ed to be producing by midyear and will mine from the healthier No. 8 seam. Cline Group Will Become Majority Owner of Donkin Coal Mine The U.S.-based company headed by billionaire Christopher Cline is expected to become majority owner of the $500 million Donkin cok- ing and thermal underground coal mine in Nova Scotia, Canada, by the end of December, and the mine could be in partial production sometime in 2015. Dawson Brisco, manager of corporate development for Morien Resources Corp., located in Dartmouth, Nova Scotia, said the Cline Group was on track to complete the transaction with Swiss-based Glencore by the close of 2014. Glencore is one of the world's largest global diversified natural resource companies and is the largest coal producer in Australia with nine mining complexes across New South Wales and Queensland. Once the deal is done, Cline will own a 75% stake in Donkin with Morien controlling the remaining 25%. Morien was spun off in late 2012 from Erdene Resources and Development, with headquarters in Halifax, Nova Scotia. Glencore decided to sell its share of Donkin more than a year ago, saying the one-off project was too small to develop by its standards. Morien had a right of first refusal to acquire Glencore's 75% ownership in the mine, but opted not to execute the agreement after Cline entered the picture several months ago. Final regulatory approval for Donkin, located along the rugged northeastern coast of Nova Scotia's Cape Breton Island, is anticipated from the province before the end of December. At peak output, Donkin is estimated to produce about 3.6 mil- lion tons of coal annually for both domestic and export markets. Cline officials could not be reached for comment about the com- pany's impending acquisition of Donkin. However, Cline represen- n e w s c o n t i n u e d 10 www.coalage.com December 2014 Sunrise Coal is increasing production to 10.2 million tons per year.

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