Coal Age

JUN 2013

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news continued tons of high-sulfur steam coal in 2013, up from an earlier estimate of 5.5 million tons. Oaktown 2, owned by the company's Vectren Fuels subsidiary, began production this spring. Vectren is counting on Oaktown 2 and its sister deep mine, Oaktown No. 1, both in Knox County, along with changes in the mining plan at the Prosperity underground mine in Pike County, Ind., to eventually lower its operating costs. During the ramp-up phase at Oaktown 2, however, costs will be higher, company officials cautioned during a May conference call with analysts to discuss first-quarter earnings. All three mines are continuous miner operations. Vectren spent more than $125 million to develop the two Oaktown mines. Oaktown 1 began producing coal in 2010. Lower production costs and a rise in coal sales could help Vectren's coal mining segment return to profitability. Coal mining lost $6 million in the first quarter of 2013 and Vectren predicts the red ink could climb to $12 million by the end of 2013. CALENDAR OF EVENTS July 23-26, 2013 Mpumalanga Minex 2013—will be held in Middelburg, South Africa. Contact: Jurie Smit, Minex Management (Tel: 27 79 467 0738; Fax: 27 86 719 4581; Email:; Web: July 30-August 1, 2013 32nd International Conference on Ground Control in Mining— will be held at the Lakeview Golf Resort and Spa in Morgantown, W.Va. Contact: Karen Centofanti (Tel: 304-293-3901; Fax: 304-293-5708; Email:; Web: August 11-15, 2013 23rd World Mining Congress—will be held in Montréal, Québec, Canada. Contact: Canadian Institute of Mining, Metallurgy and Petroleum (Tel: 514.939.2710; Web: or August 20-23, 2013 AIMEX—will be held at the Sydney Showground, Sydney Olympic Vectren blamed most of the losses on the mild winter of 201112 that led many electric utilities to ramp down their coal burn, sometimes delaying coal deliveries as a result, and historically low natural gas prices. Since then, gas prices have more than doubled and the colder winter of 2012-13 helped to burn down stockpiles at many utilities. Now, Vectren expects its three coal mines to be producing at the rate of 7.5 million tons annually in a year or so, assuming demand for high-sulfur steam coal continues to recover. While many utilities have held back on coal purchases during the past year, "I think you'll start to see the customers now start to be much more open about their future spending timelines," said Carl Chapman, Vectren's chairman, president and CEO. "But it's really just because they're working through those coal piles." In addition to lower gas prices, the company continues to believe that, longer term, reduced coal volumes from Central Appalachia due to increased government regulation and the large number of scrubbers installed by utilities in the United States, including the Midwest, should drive stronger demand for Illinois Basin coal. Disappointment in the performance at Prosperity, which experienced thin coal seams in the first quarter as well as a significant shutdown in March because of a geological issue, prompted Vectren to implement changes in its mining plan. In April, Prosperity's continuous mining equipment was moved to areas of the mine with thicker seams and lower-profile mining equipment was placed into service there for the first time. As a result, "We expect the average cost per ton at Prosperity to improve for the remainder of the year," said Jerry Benkert, Vectren's executive vice president and CFO. As of March 31, Vectren estimated its total IB reserves at approximately 126 million tons. Five Star Mining is the contract miner at Prosperity while Black Panther Mining serves as contract miner at the two Oaktown mines. Park, Australia. Contact: Reed Mining Events, Reed Exhibitions Australia (Tel: 61 2 9211 7544; Email:; Web: September 4-6, 2013 Fall Blasting & Explosives Safety Training Seminar—will be held at the South Dakota School of Mines, Rapid City, S.D., and the Crazy Horse Memorial. Contact: RAM, Inc.-Robert A. McClure, Inc. (Email:; Web: September 11-13 2013 Bluefield Coal Show—will be held at the Brushfork ArmoryCivic Center in Bluefield, W.Va. Contact: The Greater Bluefield Chamber of Commerce (Tel: 304-327-7184; Fax: 304-325-3085; Email:; Web: September 16-19, 2013 13th Annual International Pittsburgh Coal Conference—will be held in Beijing, China. Contact: Ke Liu, National Institute of Clean and Low Carbon Energy (Tel: 86 10 57339698; Email:; Web: September 16-20, 2013 XV International Congress for Mine Surveying—will be held in Aachen, Germany. Contact: RWTH Aachen, Institute for Mine Surveying (Tel: 49 241 80 95687; Fax: 49 241 80 92150; Web: September 21-24, 2013 2013 National Association of Abandoned Mine Land Programs Conference—will be held at the Resort at Glade Springs in Daniels, W.Va. Contact: WV DEP/AML&R (Email:; Web: 24 Alliance, White Oak Move Forward with Longwall Operation Alliance Resource Partners said its investment in privately owned White Oak Resources LLC, developer of the new White Oak No. 1 longwall coal mine near McLeansboro in Hamilton County, Ill., is approaching half of the roughly $425 million Alliance agreed to contribute as part of its September 22, 2011, transaction. Under the agreement, Alliance initially invested $69.5 million in White Oak. In a May filing with the U.S. Securities and Exchange Commission, Alliance said it had funded $164.8 million to White Oak as of March 31. "We expect to fund a total of approximately $300.5 million to $425.5 million from the transaction date through the next approximately two years, which includes the funding made to White Oak at closing and through March 31, 2013," Alliance said. As part of their original deal, the two companies also entered into a coal handling and services arrangement under which Alliance is constructing a coal preparation plant and other surface facilities at the mine site in southern Illinois. Alliance said it expects to finance these additional commitments "utilizing cash balances, future cash flows from operations, borrowings under credit facilities and cash provided from the issuance of debt or equity." June 2013

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