Coal Age

JUN 2016

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16 www.coalage.com June 2016 news continued which operates the two-mine Galatia complex in Saline Coun- ty, is shifting production to the lower-cost New Future mine. In Belmont County, Ohio, another Murray subsidiary, Ohio Valley Coal Co., intends to cease production in November at the Powha- tan No. 6 mine because its high-sulfur coal reserves finally have played out after nearly 50 years. New Era produced 939,591 tons of coal in the first quarter of 2016 while Powhatan turned out 1.2 million tons, according to the federal Mine Safety and Health Administration. In 2013, Powhatan produced 5.5 million tons. New Era and New Future are non-union operations while Powhatan's hourly employees are represented by the United Mine Workers of America. The union said it is negotiating with Murray in hopes of preserving the jobs of as many Powhatan miners as possible at other Murray operations. NRP Sues Foresight Energy Over Royalties For the second time in recent months, Natural Resource Partners LP (NRP) has filed a lawsuit against Illinois' largest high-sulfur steam coal producer, Foresight Energy, this time over the alleged incorrect payment of royalties involving NRP coal lease agree- ments. NRP, a Houston, Texas-based company whose business model is based largely on leasing mineral reserves to producers, also sued Foresight on November 24, 2015, for alleged breach of contract involving the latter's idled Deer Run longwall mine near Hillsboro in Montgomery County, Illinois. In a May regulatory filing, NRP disclosed it sued Foresight on April 1 in Macoupin County, Illinois, Circuit Court because Fore- sight's Macoupin Energy LLC subsidiary "failed to comply with the terms of its coal mining, rail loadout and rail loop leases by incor- rectly recouping previously paid minimum royalties." Macoupin Energy operates the Shay No. 1 continuous miner operation in Ma- coupin County. The mine south of Carlinville previously was known as Monterey No. 1 and owned by Exxon Coal USA. It was sold to Macoupin Energy in 2009. According to the suit, Foresight's failure to properly calculate its recoupable balance and to make payments in accordance with the lease agreements in the third and fourth quarters of 2015 and the first quarter of 2016 resulted in a $4.7 million negative cash impact to NRP. While NRP said it intends to pursue the legal claim, it added that "a valuation allowance for the receivable amount has been re- corded given the early stage of this ongoing litigation. It is possible that the partnership's current estimate of the valuation allowance re- lated to this matter could change, perhaps materially, in the future." Various companies controlled by Chris Cline, including Fore- sight, lease coal reserves from NRP, and NRP also leases coal trans- portation assets to them for a fee. Cline, individually and through another affiliate, Adena Minerals LLC, owned a 31% interest in NRP's general partner, as well as approximately 500,000 of NRP's common units as of March 16. In the pending November suit, NRP claimed Foresight breached their contract through a "wrongful declaration of force majeure" at Deer Run, which has produced coal for only a few weeks since March 26, 2015, when elevated levels of carbon monoxide were detected hundreds of feet below ground. After receiving approval from the federal Mine Safety and Health Administration, Foresight temporari- ly sealed the mine earlier this year in an attempt to shut off oxygen to a combustion event apparently occurring in the mine. NRP said revenue from Foresight totaled $10.1 million, or 9.8%, of its total revenue in the first quarter of 2016. The Fore- sight revenue is spread out over a number of different mining op- erations and leases. NRP reported net income of $23 million, or $1.88/unit, in the January-March period, up from net income of $17.1 million, or $1.40/unit, a year earlier. Paringa Amends Sales Deal While Switching Up Strategy Following a change in its strategy that will see the Buck Creek No. 2 operation developed before the larger No. 1 project, Paringa Resourc- es has amended its coal sales contract with Louisville Gas and Elec- tric Co. (LG&E;) and Kentucky Utilities Co. (KU) to parallel the change in direction. The sales agreement signed in October 2015 included delivery of coal from the proposed No. 1 mine, which is projected to produce 3.8 million metric tons (mt) per year. In February, the pro- ducer opted to develop No. 2 first after a scoping study determined that the 1.8-million-metric-ton-per-year (mtpy) operation possessed a lower capex of $44 million. Both mines are located in western Ken- tucky, within the Illinois Basin (ILB). The amended deal is substantially the same as the prior one, with volumes and specifications remaining unchanged. LG&E; and KU's fixed sale prices have changed slightly to reflect recent sales data, officials noted, and the project development milestones and delivery schedule have been updated for the No. 2 mine. Specifically, c a l e n d a r o f e v e n t s July 26-28, 2016: International Conference on Ground Control in Min- ing, Lakeview Resort and Conference Center, Morgantown, West Virginia. Contact: Web: http://icgm.conferenceacademy.com. August 23-24, 2016: 124 th Annual Illinois Mining Institute (IMI) Meeting and Expo, Marion, Illinois. Contact: Web: www.illinoismininginstitute.org. September 14-16, 2016: 2016 MEMSA Technical Symposium, Sher- aton Sand Key, Clearwater Beach, Florida. Contact: Web: www. miningelectrical.org. September 26-28, 2016: MINExpo INTERNATIONAL 2016, Las Vegas Convention Center, Las Vegas, Nevada. Contact: Web: www.min- expo.com. September 20–21, 2016: S&P; Global Platts 39 th Annual Coal Market- ing Days Conference, Omni William Penn Hotel, Pittsburgh, Penn- sylvania. Contact: Web: www.coalmarketingdays.com. October 16-18, 2016: World Coal Leaders Network, EPIC SANA, Lis- bon, Portugal. Contact: Web: www.coaltrans.com/world-coal-con- ference/details.html. December 5-9, 2016: American Exploration and Mining Association Annual Meeting, Sparks, Nevada. Contact: Web: miningamerica.org. January 29-February 1, 2017: ISEE 43 rd Annual Conference for Explosive and Blasting Technique, Orlando, Florida. Contact: Web: www.isee.org. February 20-23, 2017: SME Annual Conference & Exhibition, Denver Convention Center, Denver, Colorado. Contact: Web: www.smenet.org. May 7-9, 2017: Haulage & Loading, Wigwam Resort, Phoenix, Arizo- na. Contact: Web: www.haulageandloading.com. June 13-15, 2017: Longwall USA, David L. Lawrence Convention Center, Pittsburgh, Pennsylvania. Contact: Web: www.longwallusa.com.

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