Coal Age

JAN-FEB 2017

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Page 6 of 51

January-February 2017 5 news continued Greens Hollow Coal Tract Receives Bid of $22.9M On January 4, the Bureau of Land Management (BLM) held a com- petitive coal lease sale by sealed bid for the Greens Hollow Coal Tract, a 6,175.39-acre area in Sanpete and Sevier counties, Utah. The site is estimated to contain approximately 55.7 million tons of recoverable coal and is adjacent to the SUFCO mine, which con- tains other federal coal leases. The BLM received one bid from Canyon Fuels Company LLC, out of Grand Junction, Colorado, for $22.85 million, or $3,700.17 per acre. The result is only preliminary and will not be confirmed until the BLM sale panel determines if the bid meets or exceeds the estimated fair market value for the coal resource in the Greens Hollow Tract. A date has not been set for the sale panel meeting, however, it will be conducted as soon as possible. If the BLM sale panel determines that a high bid meets or exceeds fair market value, the BLM will issue the lease after the Department of Justice has been allowed 30 days to conduct an an- titrust review of the bidder's coal holdings. When a coal lease is issued, an annual rental payment of $3 per acre is required, along with a royalty payment of 8% of the value of coal produced by un- derground mining methods. 4 New Met Mines Planned for Pennsylvania At least four new underground metallurgical coal mines are planned for Pennsylvania in 2017 as the industry looks to take ad- vantage of rising demand and prices for met coal both domestical- ly and internationally after spending several years in the doldrums. Rosebud Mining, Corsa Coal, Robindale Energy and AK Coal Resources all are developing new mines in the Keystone state ranging in size from several hundred thousand tons annually to nearly a million tons a year. Much, though not all, of that output will be earmarked for the seaborne export market. AK Coal, how- ever, plans to supply coal from its new Polaris mine in Somerset County to a plant in Middletown, Ohio, owned and operated by its AK Steel parent company. AK Coal currently produces met coal for Middletown at its North Fork deep mine also in Somerset County. Although the company was issued a final mining permit from the Pennsylvania Department of Environmental Protection (DEP) for Polaris, it has w o r l d n e w s Japan to Build 45 New Coal Pants in Next 10 Years Japanese companies plan to develop about 45 additional coal power plants, adding more than 20 gigawatts (GW) of capacity, in the next de- cade, according to the U.S. Energy Information Administration (EIA). Fos- sil fuels accounted for about 82% of Japan's net electricity generation in 2015, up from 62% in 2010. The share of fossil fuel-powered generation rose substantially for the first time in several decades in the wake of the Fukushima disaster when electric utilities turned to hydrocarbons as substitutes for the lost nuclear power generation, the EIA said. According to the Japan Electric Power Information Center, there are more than 60 major thermal power plants owned by the top 10 electric utilities and J-Power and numerous combined-cycle LNG-fired or coal- fired plants are under construction or are in the planning stages. Domestic coal production dwindled to virtually nothing in 2002, and Japan began importing all of its coal, primarily from Australia. Coal im- ports grew to 210 million short tons of coal in 2015 from 193 million short tons in 2011, after more coal-fired generation capacity came on- line. Japan, which was the world's top coal importer for decades, dropped to the third-largest importer in 2015, just below China and India. Rio Tinto Sells Coal & Allied to Yancoal Rio Tinto announced it has reached an agreement to sell Coal & Al- lied Industries Ltd. to Yancoal for up to $2.45 billion. This includes an initial $1.95 billion cash payment and $500 million in $100 mil- lion installments paid over five years. Prior to February 24, Yancoal Australia is entitled to elect an alternative purchase price structure of a single cash payment at completion of $2.35 billion. In addition to the sale consideration and potential royalties linked to the coal price, Rio Tinto will continue to benefit from earnings and cash flow generated by Coal & Allied until completion of the transac- tion. The Coal & Allied operations will also continue to use Rio Tinto Marine freight services following completion of the transaction. Subject to all approvals, the transaction is expected to close in the second half of 2017. Coal & Allied is the holding company for Rio Tinto's thermal coal business in the Hunter Valley region of New South Wales. Coal & Al- lied owns and operates multiple, multi-seam open-cut mines in the Hunter Valley. It has a 67.6% interest in the Hunter Valley Operations mine, an 80% interest in the Mount Thorley mine, a 55.6% interest in the Warkworth mine, a 36.5% interest in Port Waratah Coal Services, which owns a coal export terminal located at the Port of Newcastle, and other undeveloped coal assets, including various landholdings. The Hunter Valley Operations and Mount Thorley Warkworth mines together produced 25.9 million metric tons (mt) of saleable thermal and semi-soft coking coal in 2016. Yancoal Australia is owned 78% by Yanzhou Coal Mining Co. Ltd. Yancoal Australia operates a portfolio of seven mines, projects under feasibility study, a suite of exploration assets and infrastructure share- holdings across New South Wales, Queensland and Western Australia. Palmer Plans New Coal Operations for Australia The Australian reported that Clive Palmer plans to take advantage of rising coal prices by building an open-pit mine within the boundaries of his Mamelon cattle station. Fairway Coal and Styx Coal, both owned by Palmer, have submitted documents to the federal environment de- partment declaring their intention to build the Styx coal mine, be- tween Rockhampton and Mackay, to export thermal and coking coal. If approved, construction is slated to start in about a year and first production is targeted for the second quarter of 2018. Palmer's plans in- Continued on p. 6... top 10 coal-producing states (in Thousand Short Tons) Week Ending (12/31/16) YTD '16 YTD '15 % Change Wyoming 298,503 375,773 -20.6 West Virginia 81,198 95,633 -15.1 Pennsylvania 45,163 50,872 -11.2 Illinois 45,156 56,227 -19.7 Kentucky 43,797 61,434 -28.7 Texas 41,842 35,918 16.5 Montana 31,880 41,864 -23.8 Indiana 29,364 34,295 -14.4 North Dakota 29,354 28,802 1.9 New Mexico 14,731 19,679 -25.1 U.S. Total 738,661 896,941 -17.6

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