Coal Age

JUN 2013

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news continued Continued from pg 8... tom line growth." In October 2012, L&L signed a contract to provide 360,000 mt of coal to Datang's Heshan power plant in Guangixi over a 10-month period. TEPCO, Chubu Electric to Jointly Build Coal-fired Plant Chubu Electric Power Co. will help the struggling Tokyo Electric Power Co. (TEPCO) construct a coal-fired power plant in an unprecedented partnership that involves the sale of power outside a utility's service area, The Nikkei reported late last month. The 600,000 kW facility is expected to start operating in 2019. Chubu Electric will put up around 90% of the roughly 80 billion yen needed to build the plant at Tepco's Hitachinaka power station in Ibaraki Prefecture. The cutting-edge facility will supply about 70% of its output to TEPCO. The rest will go to Chubu Electric, which will use TEPCO's grid to sell some of the electricity in the greater Tokyo area. Operation will likely be handled by Tepco. Rising Concerns over Scotland's Mining Liabilities With all of the coal mined in Scotland now produced from relatively low-tonnage opencast operations, the recent collapse into administration of the two largest producers, Scottish Coal and ATH Resources, has led to concerns over the funding needed to restore the two companies' existing mine sites. According to a report from KPMG, the liquidators for ATH's operating arm, Aardvark TMC, and Scottish Coal, mine restoration in the county of Ayrshire could cost between £48 and £90 million (US$72-$135 million), with existing bonds covering only part of the total. As a worst case, KPMG said, up to £62 million (US$93 million) may be needed from public sources to pay for mine restoration in this area alone, with the two companies having operations in other parts of Scotland as well. ATH Resources went into administration in December when its principal creditor demanded repayment of outstanding debt. The company had opencast mines in Ayrshire, Fife and Dumfries and Galloway. Scottish Coal, meanwhile, had operations in Ayrshire, Lanarkshire and Fife, employing around 600 people when it entered administration in April. Weak coal markets have been cited as the cause of the two companies' financial problems. Scottish Coal's six mines produced around 4 million mt in 2011, while ATH's output has been some 2 million mtpy. Both mainly supplied the power-station market. In mid-May, Hargreaves Surface Mining Ltd. paid £10 million for ATH's Netherton, Duncanziemere and Glenmuckloch operations, having already bought out £12.5 million of ATH's debt for £5 million. The move has secured some 230 jobs. Hargreaves is also KPMG's preferred bidder for some of Scottish Coal's assets, with the sale expected to be finalized by late June or early July. However, it is unclear whether the deals include former operations where restoration has yet to be completed, in which case funding for the work would still have to come from the public purse. The Hargreaves group has also been the operator of the 1 million mtpy Maltby deep mine in England's Yorkshire coalfield, where operations ended at the end of last year following geological and safety problems. The company raised £42 million (US$63 million) in new equity in April to expand its surface-mining portfolio. ˛ 10 www.coalage.com es of vessels; providing technical assistance to the state's smaller coal producers, a group that in general does not have the international sales force or experience doing business overseas like its larger counterparts; and expanding the global awareness of Illinois coal by educating the state's trade representatives about Illinois coal, supporting trade missions to the markets that hold the greatest promise for Illinois coal, and potentially encouraging foreign investment in Illinois coal properties. Although all Illinois coal exports currently are shipped from the Gulf, the study said coal also could move overseas through the Great Lakes or Pacific Northwest. Seven New Met Mines for Kentucky A veteran Central Appalachia coal operator plans to open seven metallurgical-quality underground coal mines in Pike County, Ky., over the next several months, with most of the coal destined for foreign markets, including China. Bob Smith, who owns High Ridge Mining, began leasing coal reserves in the traditional coal-producing eastern Kentucky county years ago, now controls an estimated 100 million tons of coal in the Alma, Pond Creek and Cedar Grove seams. Altogether, the mines are projected to produce a total of 1 million tons a year, and Smith said he has the necessary permits to mine the coal as well as a buyer, who has not been publicly identified. Applications were being accepted in the spring for the roughly 250 jobs that will be created once the mines are operating. The hiring could not come at a more opportune time for eastern Kentucky, a region that has lost in excess of 4,000 mining jobs and experienced more than a 40% decline in coal production during the past 18 months. "This deal goes to China and other places," said long-time Pike County Judge-Executive Wayne T. Rutherford, who said he has known Smith for years. "This is where our market is going to be. We're only going to have deep mines here in the future and it's going to be exported." Rutherford, a fierce defender of the coal industry, said the current market downturn is not the first to hit the region. When coal mining recovers in eastern Kentucky, "the ones who start building it back up are the local" producers, he said, "not the national companies." There are signs of a modest coal recovery in Kentucky in 2013. On the heels of a sharp decline in production and mining jobs in 2012, preliminary data released by the Kentucky Department of Natural Resources in May indicated the state's total coal output increased by a marginal 0.4% during the first three months of the year, to a rate of 20.6 million tons per quarter. The growth occurred in the high-sulfur western Kentucky coalfield, where production climbed by 2.3% in the first quarter. Eastern Kentucky production decreased by 1.5% in the first quarter and has fallen by 26% in the past 18 months and 38% since 2000. Kentucky coal mine employment continued to dip in the first quarter, by 990 jobs, which was a slower decline than in 2012. Bill Bissett, president of the Kentucky Coal Association, said he remains concerned about the continued drop in mining jobs. "We would say we're down but not out in the east," he said. Pointing to an increase in coal exports in the region, he "cau- June 2013

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