Coal Age

NOV 2018

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Page 9 of 51

8 November 2018 news continued stock of Alpha Natural Resources Holdings Inc. they own, representing approximate- ly 48.5% ownership in the merged entity. Prior to the closing of the transaction, Al- pha stockholders will also receive a spe- cial cash dividend in an amount equal to $2.725 for each Class C-1 share and each share of common stock of Alpha Natural Resources Holdings Inc. they own. American Resources Acquires Met Coal Mining Complex in West Virginia American Resources Corp. has entered into an agreement to acquire all of the assets of Synergy Coal, located in Wyoming County, West Virginia, in an all-stock transaction valued at $16 million. The acquisition in- cludes all coal mining permits, including the associated reclamation bonds, govern- mental approvals, a coal processing facili- ty, a rail loadout, more than 1,000 acres of mineral and surface ownership, and all oth- er assets owned by Synergy Coal. American Resources will create a fourth central Appalachian production hub, called Wyoming County Coal LLC. It would be the company's first production complex in West Virginia. Wyoming County Coal has a fully-permitted and established mining, processing and transportation in- frastructure. The company sees additional expansion opportunities in adjacent areas. Similar to existing American Resourc- es processing and loading facilities, once upgrades to the coal preparation plant and loadout are complete, the processing and rail loading infrastructure will have excess capacity to process and/or load third-par- ty coal from other coal producers, increas- ing the facility's efficiencies and lowering overall operating costs at the complex. American Resources said it plans to begin development and expansion of the hub over the next 18 months with a goal of ramping up production from the complex starting in 2020. Initial production will tar- get the mid-vol met coal found within the Eagle, Gilbert and Lower War Eagle coal seams, with an estimated coal deposit of more than 21 million tons and expandable with additional core drilling and analysis. All future production will be processed and loaded to either truck or rail on site. The company intends to upgrade the 350 ton- per-hour prep plant at the site to increase the efficiency and production capabilities of the operation. There is also a loadout facility that has direct access on the Norfolk South- ern Railway that will be upgraded to handle additional volumes and greater efficiency. Additionally, the complex has ample coal storage capacity in excess of 170,000 tons and a fully permitted refuse impoundment. "We feel that this is a milestone acqui- sition for the future of American Resourc- es," CEO Mark Jensen said. "This not only expands our operational footprint into the state of West Virginia while further diver- sifying and enhancing our coal qualities, but it also validates our growth platform and value of our public company." Jensen said the company's goal is to build out the complex to produce more than 2 million tons of production annually once completed. This will represent one-third of the company's estimated yearly production target within the next five years." American Resources said it sees am- ple opportunity to expand their geological coal deposits around the complex in the future, while also exploring opportunities to offer third-party coal processing to oth- er local operators without the processing or transportation infrastructure. The company is currently finalizing a budget for capital required to bring the mines into production and rehabilitate the processing and rail loading infrastructure. Hallador Adds 6 New Coal Supply Contracts, Raises Production Guidance to 7.3M Tons Hallador Energy Co. has raised the 2018 steam coal sales forecast for its Sunrise Coal subsidiary to 7.3 million tons — a 300,000- ton increase — after locking up six new supply contracts this year through the end of September, according to Brent Bilsland, the company's president and CEO. Bilsland gave an upbeat report to an- alysts during the Colorado-based compa- ny's third-quarter earnings call on Novem- ber 6, claiming Hallador/Sunrise are in a "unique position" in the Illinois Basin be- cause they are able to ramp up production quickly based on market demand. The company produced 1.7 million tons in the third quarter, down from almost 2 million tons a year ago. The small decline was expected, however, as Hallador/Sunrise reopened the Carlisle underground mine in Sullivan County, Indiana, in July and started up the long-awaited Princeton Rail Loop in Gibson County, Indiana, earlier this year, a move that gives the company access to new sales, especially in the U.S. Southeast, via the Norfolk Southern Railway. But the company sold almost 2 million tons in the July-September period, a 32.8% increase from the second quarter of 2018. After adding the six new contracts, Bilsland said the company now supplies 15 power plants in Indiana, Georgia, North Carolina, South Carolina and Alabama, al- though he did not identify the individual generating stations. Carlisle, once the company's flagship operation until it was idled nearly three years ago, produces coal somewhat lower in sulfur content compared to most Illinois Basin coal, thus aiding the blending process with higher-sulfur coal to produce a prod- uct desired by some electric utilities. Carl- isle's restart also means less reliance on the smaller Ace in the Hole lower-sulfur steam coal surface mine in Clay County, Indiana. "We started production at Carlisle, giving us a slightly different quality to offer the market while increasing Hallador's ca- pacity by 2.5 million tons per year, allow- ing the company to quickly ramp up if the market needs it," he said. Bilsland said he expects the compa- ny's production to total about 2.1 million tons in the fourth quarter this year. "Our volumes are increasing. We think there is a potential for our volumes to increase be- yond our forecast." Indeed, he believes Hallador/Sunrise are not through adding new sales for 2018. The company is still in the "RFP season," he said, referring to utility coal requests for proposals for 2019 and beyond. "There seems to be willingness of utilities to trans- act in multi-year contracts. I'm not sure why, but the export market has sucked a lot of capacity out of the U.S." As a result, "We think we'll come out of this RFP season with an even larger book of sales." Hallador/Sunrise have benefited from the stronger exports. "Export demand has increased dramatically, leading customers in the Southeast to add Hallador as a new supplier," Bilsland noted. As it currently stands, the company has sales totaling 19.6 million tons com- mitted through 2022. Bilsland indicated he is not overly con- cerned that Illinois Basin (ILB) producers Continued from p. 5...

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