Coal Age

DEC 2018

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14 December 2018 news continued ment filters, with expected high returns and rapid payback, a very attractive valu- ation and tangible synergies." Shoal Creek is located on the Black Warrior River in Central Alabama and serves Asian and European steel mills. Shoal Creek coal typically prices at or near the high-vol A index, which historically has sold at a modest discount to the Australian hard coking coal index, the company said. The mine produced 2.1 million tons of metallurgical coal in 2017 and sold 2.4 million tons, generating $387 million in revenues, $160.8 million in net income and $161.8 million in adjusted EBITDA. A new collective bargaining agreement was effective at closing. The new labor agreement provides for a 401(k) program. The prior multiemployer pension plan is no longer effective and related obligations are not included in the acquisition. Prior retiree healthcare liabilities were also re- tained by Drummond. "We are very pleased to welcome the productive Shoal Creek workforce to the Peabody team," said Kemal Williamson, Peabody president, Americas. "Peabody looks forward to safely and quickly integrat- ing the mine into our portfolio and benefit- ting from the experienced workforce and well-capitalized nature of the operation." Shoal Creek has 58 million tons of proven and probable reserves with an initial 17 million tons with minimal an- ticipated capital requirements under the current mine plan, and additional reserves expected to be accessed with relatively low capital requirements. Shoal Creek uses longwall mining techniques to mine both the Blue Creek and Mary Lee coal seams. Corsa Offers 2019 Operational and Sales Guidance Corsa Coal, a metallurgical coal producer, expects to sell 2 million to 2.4 million tons of met coal of which 1.25 million to 1.4 mil- lion tons will be produced by the company. Most of the coal (71%) will be exported. "In 2018, Corsa advanced several strategic priorities that position the busi- ness well for future success in 2019 and beyond," said George Dethlefsen, CEO of Corsa. "We completed the ramp-up of the Acosta deep mine, made significant prog- ress on the development of the Horning mine, developed the northeastern reserve base at the Casselman mine and complet- ed a face mining equipment upgrade cycle — a move that will reduce capital expendi- tures in the coming years while also reduc- ing repair and maintenance expenses and improving productivity." In addition to accomplishing these objectives, Dethlefsen said he expects to increase company produced metallurgi- cal coal sales levels by 23% and will have grown overall metallurgical coal sales 29% by the end of 2018. In March, Corsa com- pleted the sale of its thermal coal-produc- ing Central Appalachia division to become a pure play metallurgical coal producer. In 2019, the company forecasts met- allurgical coal sales to increase by 33%, as the Casselman and Acosta mines are pro- ducing at full capacity and the company will ramp up production at the Horning and Schrock Run mines, Dethlefsen said. "We are guiding to cash production costs per ton sold of $78 to $82 in 2019, re- flecting reduced costs per ton sold at both Casselman and Acosta and benefiting from the lower cost profile of our Schrock Run surface mine," he added. "In 2019, we expect to begin development work at our Keyser mine in Somerset County." Murray Energy, FES Settle Coal Contract Dispute Officials with Akron, Ohio-based First-Ener- gy Corp.'s bankrupt FirstEnergy Generation LLC and FirstEnergy Solutions subsidiaries are urging a federal bankruptcy judge to approve a settlement, before the end of De- cember, between the companies and Mur- ray Energy Corp. that resolves a dispute over a long-term major coal supply contract. James Mellody, vice president of fuel and unit dispatch for FG, told the federal bankruptcy court for the northern district of Ohio in mid-November that once the settlement agreement is approved by the court, Murray Energy's $3.1 billion unse- cured damage claim against the companies will be terminated. In its place, St. Clairs- ville, Ohio-based Murray Energy will be al- lowed an unsecured $75 million claim. "Entering into the settlement agree- ment is in the best interests of the debtors' estates," Mellody said. A contract Murray Energy, the largest privately owned coal company in the U.S., inherited from Consolidation Coal Co. in late 2013 as part of Murray's acquisition of five longwalls in West Virginia autho- rized Murray to deliver 6.5 million tons per year of steam coal to FES and FG through 2028. The coal essentially was committed to the 2,490-megawatt Bruce Mansfield power plant near Shippingport, Pennsyl- vania, and, 1,490-megawatt W.H. Sammis power plant in southern Ohio. FES and FG, which filed for Chapter 11 bankruptcy reorganization on March 31, previously asked the bankruptcy court to reject the Murray Energy contract, but were denied in October by Judge Alan Koschik. FES and FG said they no longer require as much coal under the Murray Energy con- tract. Under the new agreement, Murray En- ergy would continue to supply a reduced but unspecified amount of coal to Mansfield and Sammis through December 31, 2019. Mur- ray also would continue to dispose, at cost, of coal combustion waste created by burning coal at the power plants. FES/FG said they would not be able to keep Mansfield running without the coal combustion residuals ser- vices provided by Murray Energy. Mellody said the $75 million unse- cured claim asserted by Murray Energy is reasonable to resolve the longstanding coal supply agreement. "It is uncertain that FG would be able to find both an alternative, reliable source for coal and a replacement for CCR disposal services at commercially reasonable prices," he added. Entry into the settlement agreement will provide FES/FG with valuable benefits to their businesses, according to Mello- dy. "The rejection of the [long-term] 2006 [contract] and entry into the 2018 [con- tract] will allow FG to avoid the overwhelm- ing, burdensome and long-term minimum volume requirements' in the previous contract and provide the company "with a shorter-term, cost-effective agreement for coal to operate the Bruce Mansfield and W.H. Sammis power stations." Mellody noted that the debtors are expected to save $21.7 million in 2018 and $13 million in 2019 by rejecting the long- term contract and entering into the 2018 arrangement. "Additionally, the 2018 CCR agreement will provide FG with contin- ued access to the essential service of CCR disposal for the CCR generated from the operation of the Bruce Mansfield power station at a favorable price." He said the new agreement has a two-tier pricing structure. FG "will pay a set price per ton for a certain number of tons of

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