Coal Age

MAR 2019

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Page 6 of 51

March 2019 5 leading developments continued Glencore Will Limit Coal Production The world's largest exporter of thermal coal, Glencore announced it would be capping its yearly coal production in the future to combat climate change. Glencore said it will prioritize its capital investment to grow produc- tion of commodities "essential to the energy and mobility transition" and limit its coal production capacity to current levels, which is about 145 mil- lion metric tons (mt). The company announced further steps to transitioning to a low-carbon economy, which included rebalanc- ing its portfolio toward commodities that support low carbon. Glencore added that it was on track to meet its target of reducing greenhouse gas emissions by 5% by 2020. According to Wood Mackenzie's research director, Prakash Sharma, Glencore had an estimated market share of nearly 25% in the seaborne trade last year and has a dominant position in thermal coal segment. "In that regard, capping coal pro- duction is significant because prices could remain high amid tighter sup- plies," he added. "Glencore is chasing value over volume." He added that companies who were holding on to high-energy ther- mal coal assets will stand to gain and realize higher prices. "Glencore sits comfortably in that space due to its competitive cost position," he said. Local miners have called Glen- core's decision a "public relations ex- ercise dressed up as climate change action." Activists that had pressured Glen- core over climate change hailed the an- nouncement as a win but other miners said it was a "brilliant public relations exercise" that was driven by economics not concern for the environment. Foresight Energy Delivers Record Steam Coal Sales in 2018 Foresight Energy capitalized on strong export markets and improved domes- tic spot opportunities to post record steam coal sales of 23.4 million tons in 2018, generating total revenue of $1.1 billion and adjusted EBITDA of more than $313 million, the Murray Energy subsidiary said on February 27. This year isn't looking too shabby either as the St. Louis-based company is looking to preparing to reopen its long-idled Deer Run, or Hillsboro, un- derground steam-coal mine in Mont- gomery County, Illinois. The mine has not produced coal on a regular basis since March 26, 2015, when it was shut down by the federal Mine Safety and Health Administration because of elevated carbon monoxide readings resulting from a combustion event. Robert D. Moore, Foresight presi- dent and CEO, said Foresight also en- joyed a good fourth quarter of 2018 by selling more than 6.1 million tons and generating revenue of approximately $299 million, resulting in EBITDA of nearly $87 million. "These results reflect continued improvement in our year-over-year and sequential quarter-sales volumes, sales realization per ton sold and sales revenue," he said. "Our fourth-quarter results were the capstone of another successful year for Foresight." Foresight produced more than 6 million tons of coal in the Octo- ber-December period, up from ap- proximately 5 million tons a year earlier. Coal production for calen- dar-year 2018 amounted to 23.3 mil- lion tons, versus 21.2 million tons in 2017, for an increase of nearly 10%. Moore said the production levels underscore the efficiency and pro- ductivity of Foresight's underground mines, "which places our mines among the most efficient and produc- tive underground mines in the coun- try, as measured on a clean-ton-per- underground man-hour work basis." In 2018, Foresight's Williamson and Sugar Camp deep mining complexes in southern Illinois ranked as the second and third most-productive mines in the United States, he added, generat- ing 17.4 tons and 16.3 tons per under- ground man-hour work, respectively. On a combined basis, the Foresight mines produced more than 17 tons per underground man-hour worked during the fourth quarter of last year, and 15.3 tons per underground man- hour worked for the full year. That compares to the national av- erage for underground mines of 4.7 tons per man-hour worked during the fourth quarter and 4.6 for underground man-hour worked for all of 2018. Foresight's record sales volumes included exports of 2.7 million tons in the fourth quarter and approximately 9 million tons into the export market for full-year 2018, representing 43% and 38% of the company's total sales volumes, respectively. According to Moore, Foresight's mining operations generated $39.2 million of excess cash flow in 2018, "and was less than four times levered as defined in our March 2017 credit and guaranty agreement. Pursuant to the terms of the credit agreement, we will be sweeping to our first-lien lenders 50% of the excess cash flow, or approximately $19.6 million. The retained portion of excess cash flow of $19.6 million will be avail- Leading Developments Continued on Page 10 A coal train from Glencore's Prodeco operation in Colombia heads to port. (Photo: Glencore)

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