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/831105
12 www.coalage.com May 2017 news continued McLean County is located about 40 miles southeast of Evans- ville, Indiana. In July, actual on-site work is scheduled to commence, kick- ing off a yearlong construction process that should culmin- ate with initial coal production starting in mid-2018, according to Nathan Ainsworth, the company's vice president of business development. The April financial placement wrapped up the funding re- quired for the development of Poplar Grove and, together with a recently announced $20 million debt facility from Macquarie Bank Ltd. and existing cash reserves, Paringa will be fully funded to develop Poplar Grove. Argonaut acted as lead manager to the placement with Hart- leys Ltd. and Curran & Co. serving as co-managers. Following shareholder approval, 57.3 million shares are expected to be is- sued by Paringa on or about May 29. "This successful capital raising completes the funding re- quired for the development of the Poplar Grove coal mine starting July 2017," said Todd Hannigan, Paringa's managing director and CEO. "We now have a strong financial position to deliver on our plan to become a 6.6 million tons per year Illinois Basin (ILB) pro- ducer, starting with construction of the low-cost and high-mar- gin Poplar Grove mine and then followed by the fully permitted, high-margin Cypress mine." Paringa is patterning its ILB profile after Alliance Resource Partners, one of the region's most profitable steam coal pro- ducers. Paringa has carefully identified all of the remaining coal-burning power plants along the Ohio River that could be- come customers of Poplar Grove, first, then Cypress in a few years. Last year, Paringa secured a long-term, foundational sales contract to supply a total of 4.75 million tons of coal to Kentucky's largest electric utilities — Louisville Gas & Electric Co. (LG&E;) and Kentucky Utilities Co. (KU) — starting in mid-2018. LG&E; and KU, owned by Pennsylvania-based PPL Corp., together serve about 1.1 million customers. Paringa originally pursued the development of the Cypress reserve in McLean County. But it was estimated to cost more than $100 million to get the mine up and running. A subsequent devel- opment analysis determined it would be far less expensive to de- velop the Poplar Grove reserve first, saving the company millions of dollars. Poplar Grove will be the newest major coal mine in western Kentucky since Rhino Resource Partners opened its Parkway un- derground steam coal mine in McLean County three years ago. Parkway, also known as Riveredge, produced 343,749 tons in the first quarter of 2017, according to the federal Mine Safety and Health Administration. It is projected to produce about 1.2 mil- lion tons this year, with capacity to eventually expand to about 2 million tons a year. Rhino Plans to Expand Production Rhino Resource Partners posted a $2 million loss for the first quarter of 2017. Rick Boone, president and CEO of Rhino's gen- eral partner, however, noted improvements. "The recovery in the met coal markets had a significant positive impact on the oper- ating results for the first quarter of 2017," Boone said. "Revenue grew for the quarter and year-over-year as well as our EBITDA. In the first quarter of 2017, we fully contracted our met and thermal forecast production for the year. We expect the improved market situation will continue to provide positive financial results for the remainder of 2017." Rhino Resources continues to explore additional met coal sales to international customers. They plan to expand met pro- duction to meet the increased demand as additional contracts are finalized in the second quarter of 2017. Met coal test shipments to various international customers during the first quarter of 2017 were positive and the company remains optimistic a long-term sales agreement can be reached. "The continued resurgence in coal prices, particularly met coal prices, allowed us to execute favorable sales contracts for 2017 that provide us with substantial upside opportunity if we can continue to control our costs," Boone said. "We invested ad- ditional capital at our Central Appalachia mining complexes in the first quarter to increase production and all of our complexes in Central Appalachia are currently operating as we have strong contracted sales positons for our steam and met coal production for 2017." Pennyrile improved their operational capabilities, which led to productivity improvements. Pennyrile was a positive cash flow producer for Rhino during the first quarter of 2017 and we are confident this trend will continue throughout 2017 as we are fully contracted and the mining cost has improved from historical periods. In Northern Appalachia, Rhino Resources shipped on its base-load sales contract at the Hopedale operation during the first quarter and they continue to seek additional sales contracts. The Sands Hill operation in Northern Appalachia will cease coal production toward the end of the second quarter. Rhino Western has a fully contracted sales position for the first half of 2017 for Castle Valley operation as well as a base level of sales for the last six months of 2017. The company continues to explore additional sales opportunities. Overall, Boone is en- couraged by the rally in prices in the coal markets and he believes upside exists for Rhino for the remainder of 2017 as it continues to focus on costs and cash generation. Alpha Natural Resources Pays Off Exit Facility Alpha Natural Resources (ANR) announced it has paid off its term loan under the $125 million credit agreement entered into at the time of the company's emergence from bankruptcy (Exit Facility). The company also has entered into a new $60 million accounts receivable purchase facility with Hitachi Capital America Corp. (HCA) and a new $200 million letter of credit facility with Citi- bank, N.A. "After reviewing our 2017 business plan, current liquidity and future needs, we decided that the best course of action was to pay off the existing term loan," Alpha CEO David Stetson said. "The current environment for metallurgical coal, our strong cash bal- ance and the current cost of debt all contributed to our decision." He expressed gratitude to the lenders that have helped the com- pany through the bankruptcy process. Alpha has benefitted from resurgence in the metallurgical coal market and continued strong relationships with power utility