Coal Age

SEP 2017

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Page 10 of 51

September 2017 9 news continued quarter of 2016 and increased 55% for the first six months of 2017 over the same period in 2016. The company also reported its cost of sales (free-onboard port) decreased by $11.53/ton to $82.22/ ton in the second quarter compared to the first quarter of 2017. Revenues Decline in Spite of Alliance Resource Selling More Coal in 2017 Alliance Resource Partners sold more coal in the second quarter of 2017 than a year ago, but its net income and total revenues declined because of anticipated decreases in coal sales prices. Joseph Craft, president and CEO of the Tulsa, Oklahoma-based company, told analysts during a July 31 phone conference that he expects electric utility coal purchases to pick up in the final months of 2017. Alliance sold 8.5 million tons during the April-June period, up 6.3% from a year ago, due largely to good performances at its Hamilton longwall mine near McLeansboro, Illinois, its River View underground mine near Uniontown, Kentucky, and its Gib- son South underground mine near Princeton, Indiana. Both River View and Gibson South are continuous miner operations. The company earned $63.2 million on total revenues of $398.7 million in the second quarter, down from net income of $82.7 mil- lion on revenues of $439.2 million in the year-ago quarter. The lower number reflected reduced coal price realizations plus force majeures declared by some unidentified customers, as well as deferrals. Alliances' average coal sale price was $45.15/ton in the second quarter, down almost 15% from the year-ago quarter. "We believe our customers will make up the force majeure tons" during the latter half of this year or in early 2018, he said. Craft noted that the force majeures or deferrals were mostly related to power plant issues that since have been resolved. Other deferrals were blamed on a slow start to summer in terms of hot weather, with some customers delaying shipments until later in the year. Craft said Alliance continues to anticipate total 2017 coal production of 38.1 million tons to 39.1 million tons and sales of 38.5 million tons to 39.5 million tons. Total revenues are forecast at $1.78 billion to $1.82 billion with net income of $290 million to $330 million for this year. Alliance is looking to sell more coal in 2018, Craft said, but the company appears to have some work to do before it reaches that goal. According to Craft, Alliance still has an estimated 18 million to 19 million tons of planned production uncommitted for 2018. He was asked by an analyst if that means Alliance might have to pare back expectations. "I don't think we'll have to cut back," Craft replied. Customers, he predicted, "will be out in force in the next quarter to fill a lot of their open positions. I would certainly hope we actually increase volume next year, but we will see how the market responds." He added, "We're confident at this time we can place our tonnage at the same levels of 2017 if not increase those volumes" in 2018. However, Craft bemoaned the current short-term buying strategy of some utilities, saying that makes things difficult for both producers and the railroads that ship the coal to power plants. direct carbon fuel cell, or DCFC, will draw energy from fossil fuels at a higher rate than typical coal-fi red power generation. The chief investigator, professor Scott Donne, has spent fi ve years developing the approach, which uses a single step to convert chemical energy to electricity. It was pioneered in the early 20th century, but overlooked for the simplicity of burning coal. "A lot of energy is lost in the process of burning coal to produce heat," Donne said. "It is critical to be looking at better and more effi cient ways of producing power as coal resources continue to decline and renewable energies are still being developed." Indonesian Firm to Construct Coal Port in Vietnam Indonesian fi rm PT Intra Asia Indonesia has signed a memorandum of understanding (MoU) with its counterpart in Vietnam, in con- nection with its plan to construct a coal port in the southern part of the country worth $1 billion, according to the Jakarta Post. "The port will especially be used for cargo and logistics that will serve exports and imports between Indonesia and Vietnam, particularly coal," said Intra Asia Indonesia Commissioner Lutfi Ismail. When it operates, the capacity of the port will reach between 15 million and 20 million tons of coal per year, he said, adding that it would cut logistics cost for coal imports from Indonesia. Indonesia is expected to export 4.5 million tons of coal to Vietnam this year. India to Make Coal Washery Investment Mandatory for Private Miners India's Ministry of Coal has stipulated that private bidders for the forthcoming auction of six coking coal blocks for captive con- sumption would have to mandatorily commit investments to set up linked coal washeries to be eligible to participate in competitive bidding. According to a government offi cial, since the government objective was to stop all supplies of un-washed coal to user indus- tries, bidders at the auction would have to put in their investment plans the construction of washeries in their bid documents. In line with this, any successful bidder at the auction of the six coking coal blocks would not be permitted to supply un-washed coal mined from the captive block to their own end use plants, the offi - cial said. Similarly, to augment domestic supplies of washed coal, government owned and operated Coal India Ltd. (CIL) has been di- rected by the Ministry of Coal to construct 12 additional washeries to augment dry fuel supplies to domestic steel mills. These would be in addition to the 15 new washeries currently under various stages of construction. Once operational, these would have an aggregate capacity of 112 million metric tons per year (mtpy). The government said augmenting coal washing capacities was the only way to reduce the present import dependency of domestic steel companies. According to steel ministry estimates, India's im- ports of coking coal would be around 50 million mt in the current fi scal, and this would spike to around 180 million mtpy if domestic steel production was to be ramped up to 300 million mtpy as tar- geted by the government by 2020, the offi cial said. The Coal Ministry noted that the existing 15 operational coal washeries with aggregate production capacity of just 38 million mtpy was grossly inadequate to meet the demand for fuel by the growing steel sector. Under the circumstances, apart from aug- menting washing capacities of CIL, the government would make it mandatory for all private miners seeking to invest in coal mining to make additional investment in coal washing, the offi cial added. Continued from p.7...

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