Coal Age

JUN 2016

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

Contents of this Issue

Navigation

Page 8 of 67

June 2016 www.coalage.com 7 news continued Kentucky, by the end of June amid declining coal sales, disclosed in May it has retained a financial adviser to explore strategic op- tions to strengthen its balance sheet and boost its long-term cap- ital structure. Hord Armstrong, the St. Louis-based company's ex- ecutive chairman, said Armstrong's board of directors authorized the hiring of Maeva Group LLC of White Plains, New York, to con- duct the review process. He did not say how long the review would last and Armstrong does not expect to comment further or update the market with any additional information on the process until its board deems disclosure appropriate or necessary. During the January-March period, the company's Armstrong Coal subsidiary sold 1,424,000 tons of high-sulfur coal at an aver- age sale price of $42.44/ton, down from 1,967,000 tons at an aver- age sale price of $48.98/ton in the year-ago quarter. Cost of sales also declined, however, to $36.99/ton in the first three months of 2016 compared with $40.08/ton a year earlier. Total revenue was $60.4 million in the latest quarter, a 37% decrease from $96.3 mil- lion in the first quarter of 2015. Armstrong recorded a net loss of $13.4 million in the quarter, a slight improvement from a net loss of $15.3 million in the first quarter of 2015. Armstrong officials said they continue to see weakness in the U.S. steam coal markets driven by low natural gas prices, in- creased government regulations and continuing mild weather. On that latter front, "it would help to have 60 to 70 straight days of 90° temperatures, even 95°," this summer, said Martin Wilson, Arm- strong president and CEO. Armstrong is hardly the only coal company praying for a hot summer to help electric utilities burn down bulging coal stock- piles and rekindle demand, potentially late this year or in 2017. They may get their wish as several weather forecasters, including the National Weather Service and the Weather Channel, are calling for a hotter than normal June, July and August across almost all of the country. Until a recovery arrives, Armstrong is cutting costs wherever possible. For the remainder of 2016, production costs are expect- ed to be in the range of $36 to $36.50 per ton, according to Wilson. Cost-cutting explains the decision to shut down the Parkway continuous miner operation. "Our other mines have lower costs than the Parkway mine," Wilson said. Armstrong Coal continues to operate the Equality and Lewis Creek surface mines in Ohio w o r l d n e w s BHP Sells Indonesian Assets to Adaro BHP Billiton has entered into a deal with an arm of PT Adaro En- ergy to sell its 75% interest in IndoMet Coal and its coal assets in Indonesia — the latest move by the company to streamline its portfolio. Offcials said June 7 that PT Alam Tri Abadi, is an Adaro subsidiary that already holds the balance of the business. Un- named sources told several media outlets that the deal was worth $120 million. IndoMet Coal is made up of seven coal contracts in central and eastern Kalimantan, including its Haju operation that began operations in 2015. That operation alone has a production capacity of 1 million metric tons (mt) annually. "After a detailed review of IndoMet Coal, we concluded that al- though the project could support a larger scale development, BHP Billiton has a range of other growth options in the portfolio that are more attractive for future investment," said IndoMet Coal Asset President James Palmer. No completion date for the sale has been provided, as it is con- ditional upon several regulatory approvals. In the meantime, BHP said it and Adaro will work jointly to facilitate a fuid ownership transfer. Eskom to Revamp South African Power Plants South African utility Eskom said it has secured its coal supplies for the next half-decade and that it is planning to renew its coal feet, not decommission the plants. Chief Executive Offcer Brian Molefe said before a Parliament media briefng that it was building new plans to improve the supply of power and was upping its genera- tion to help remedy a shortage that resulted in controlled blackouts last year. "We have contracted all the coal we need for the next fve years. That is what we are looking at; we are looking at people that will supply us with coal," Molefe told the group, according to IOL. "This was critical in the energy supply for the country. "We had a total rethink on the matter; we think instead of decommissioning plants we will extend their lives as we do maintenance. That is our thinking on our feet…investment on the ageing feet was the best route that the power utility will take." According to Reuters data, at least 80% of South Africa's elec- tricity comes from coal-fred power facilities. Some of those units previously mothballed have even been brought back online to aid in supply levels. EU Clears Plan for Spain to Close 26 Mines The European Union (EU) has given its approval to a plan by of- fcials in Spain to spend 2.13 billion euros (US$2.4 billion) in aid funds to shut down 26 coal operations by 2018. According to the Associated Press, the money covers production losses from what the country called uncompetitive mines as they begin to idle oper- ations. It will also go to the severance and support of the nation's soon-to-be-furloughed workers, many of which have been protest- ing the plan. Safety work once the mines are closed is included in that total. The European Commission, which issued its approval May 26, said state aid can be used for the closures so long as it does not distort competition. According to commission data, coal makes up about 25% of the EU's electricity production. Glencore Closing Tahmoor in Australia Low prices in global coal markets is being cited for Glencore's de- cision to close the Tahmoor underground mine in New South Wales, Australia, by early 2019. "[T]he economic return from reserves still available at Tahmoor are not suffcient to warrant the investment Continued on p. 8... top 10 coal-producing states (in Thousand Short Tons) Week Ending (5/28/16) YTD '16 YTD '15 % Change Wyoming 108,725 155,472 -30.1 West Virginia 27,164 42,678 -36.4 Illinois 17,678 25,585 -30.9 Kentucky 16,949 27,185 -37.7 Pennsylvania 14,205 21,595 -34.2 Montana 12,472 17,349 -28.1 Indiana 10,108 15,094 -33.0 North Dakota 8,652 11,900 -27.3 Texas 8,342 12,358 -32.5 Colorado 5,334 8,597 -38.0 U.S. Total 256,742 378,795 -32.2

Articles in this issue

Links on this page

Archives of this issue

view archives of Coal Age - JUN 2016