Coal Age Magazine - For more than 100 years, Coal Age has been the magazine that readers can trust for guidance and insight on this important industry.
Issue link: https://coal.epubxp.com/i/695160
20 www.coalage.com June 2016 news continued the contract outlines 4.75 million tons of 11,200 btu/lb product over a five-year period starting in 2018; the figure represents 60% of the No. 2 mine's annual production over the course of the deal. The contract- ed fixed coal sales prices for Paringa's 11,200-btu/lb coal spec in the new deal now begins at $40.50/ton for the first 750,000 tons of coal delivered, an increase to $45.75/ton for the final 1 million tons sold. "The fact that LG&E; and KU are prepared to sign this major amendment to our sales contract confirms their belief that we will become a significant new source of production in the Illinois Basin and confirms the quality of the No. 2 mine," said Paringa President and CEO David Gay. The No. 2 mine is expected to start construction in the second quarter of next year and begin production by the middle of 2018. Prime production should be achieved in 2019. Production Down for Rhino Rhino Resource Partners' steam coal mines in Kentucky and Utah were bright spots, and its mining operations in Ohio and West Virginia less so, for the Lexington, Kentucky-based company in the first quarter of 2016 as Rhino, overall, produced and sold less coal than it did a year ago. Productivity improvements at Rhino's Pennyrile underground mine on the Green River in western Ken- tucky's McLean County helped the company lower its total cost of operations in the January-March period. Cost of operations per ton from continuing operations averaged $37.27 in the latest quarter, down from $52.86 in the first quarter of 2015, Rhino said. Pennyrile, also known as Riveredge, opened in 2014 and is poised to become a major producer and financial contributor for the company. The mine has long-term sales contracts with Louis- ville Gas & Electric, a PPL Corp. subsidiary and one of Kentucky's largest electric utilities along with sister Kentucky Utilities, and Big Rivers Electric Corp. Thanks to the higher productivity and improved coal recov- ery rates, Pennyrile became "cash flow positive" in the first quar- ter, according to Joe Funk, Rhino president and CEO. "We are fully contracted for 2016 at Pennyrile with 1.2 million tons forecast to be produced and sold this year. We believe Pennyrile will be a positive cash flow provider for [Rhino] for the remainder of 2016 at these pro- duction and sales levels. Pennyrile gives us additional diversification as we expect it to be a significant generator of stable cash flow as it ramps up to its full potential run rate of 2 million tons per year." In the first quarter, Pennyrile produced and sold 327,000 and 316,000 tons, respectively. That was more than a third of Rhino's total quarterly production and sales of 790,000 and 873,000 tons, respectively. Rhino's first quarter coal revenue averaged $46.42/ ton, versus $52.18/ton in the year-ago quarter. Rhino's Castle Valley underground mine in Emery County, Utah, also enjoyed a good first quarter, as coal revenue per ton increased to $38.09 compared to $36.90 in the year-ago period. Higher contracted prices accounted for the higher revenue. Sales volumes increased to 252,000 in the quarter, from 229,000 tons in the prior year. Rhino said Castle Valley's sales remain fully con- tracted through 2016. But it was a different story for the company's mines in Central Appalachia (CAPP) and Northern Appalachia (NAPP). Sales fell by more than half in CAPP to 100,000 tons from 237,000 tons a year earlier, and coal revenue per ton dipped to $56 from $64.22 in the first quarter of 2015. Rhino's CAPP operations were idle in the fourth quarter of 2015 to reduce excess inventory stockpiles, which caused an increase in cost of operations per ton in the fourth quarter compared to the current quarter, the company said. Rhino resumed mining operations at a majority of its CAPP operations in early 2016 to fulfill customer contracts for this year. Meanwhile, in NAPP, Rhino experienced delays from custom- ers accepting shipments from its Hopedale underground mine in Harrison County, Ohio, "that adversely affected our NAPP re- sults in the quarter," Funk said. Rhino sold 122,000 tons in NAPP in the first quarter, down from 251,000 in the previous year. The company said sales at its Sands Hill surface operations in Jackson County, Ohio, are fully contracted through 2016. Royal Energy Re- sources of Charleston, South Carolina, became Rhino's new owner earlier this year. Bluestone Cleared on Well Contamination Claims Mechel Bluestone has been found not guilty of contaminating 16 wells in Wyoming County, West Virginia, a judge has reportedly decided. Case attorneys told the Register-Herald Reporter that the three-weeklong trial was decided by a jury after five hours. Own- ers of the wells near Cedar Creek, which said that the contamina- tion occurred in 2006 and 2007, filed a motion to set the judgment aside for 10 days. The group, claiming the jury was influenced, has also requested an evidentiary hearing. Mechel Bluestone attorney James Brown, which also rep- resents company subsidiary Dynamic Energy, said the jury's deci- sion was the "only verdict supported by the evidence," according to the Reporter. He added that he was not aware of any evidence supporting jury influence. "The key fact was that the water in those people's wells is not water that came from our mine site. The DEP (Department of En- vironmental Protection) made that finding themselves," Brown said, noting that evidence showed high iron and orange before mining began in the area. Jim Justice, currently running for state governor, sold Mechel Bluestone in 2009 to Mechel but bought the company back in 2015. SEC Investigating Kemper Facility Costs The U.S. Securities and Exchange Commission (SEC) has opened a probe into the costs and schedule of Mississippi Power's planned Kemper coal gasification plant in Gulfport. Parent com- pany Southern Co. entered a filing May 5 that said the examina- tion appears to be looking mainly at periods after 2010 as well as "accounting matters, disclosure controls and procedures, and in- ternal controls over financial reporting" as it relates to the facility. Southern officials did not indicate how far along the probe may be or when it commenced. Kemper now has a price tag of $6.7 billion; however, at the start of planning, its backers had it approved at a cost of $2.9 billion. In the time since, delays and cost overruns have steadily sent the to- tal rising. "The company started to pick up indications that public awareness of the investigation had matured to a point that, in our judgment, it should be disclosed," Mississippi Power spokesman Jeff Shepard said, adding that no further details could be provided because of the ongoing investigation. "While we cannot predict the ultimate outcome, as we have said in our disclosures on this mat- ter, we do not expect the investigation to have a material impact News Continued on Page 35