Coal Age

MAY 2018

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Page 8 of 51

May 2018 7 news continued He attributed the price rise to "folks being more disciplined and recognizing that there is a tightening" in the market. "The ex- port market has obviously helped in that regard. It pulled a lot of volume out of the domestic market and that has helped strength- en the prices that we are seeing here domestically on the river as well as rail direct." Moore praised Foresight's two operating longwall complexes — Williamson Energy, near Marion in Williamson County, Illinois, and Sugar Camp — for ranking among the 15 most productive un- derground mines in the country in the first quarter. Sugar Camp and Williamson ranked second and third, respectively, he said, generating 15.6 and 14.5 tons per man-hour worked, respectively. Moore was asked if there is a "creative way" for Foresight to replace lost production from Deer Run, also known as Hillsboro, which last turned out coal on a regular basis in March 2015. There may be a way to do that, Moore replied, although "I don't have any plans to do anything such as that at this time. Again, we want to be disciplined in the market. And I think that folks need to continue to be disciplined. It's a volatile domestic market. And I think we all know from experience, the export mar- kets can come and go. So, we got to be thinking about how we advance any opportunities that we may have here organically and we will continue to evaluate those opportunities." Moore said he expects Foresight to sell between 21.8 million and 22.8 million tons in 2018. The company is contracted to ex- port 6.7 million tons this year, but could send as much as 9 million tons into the seaborne market. Foresight operates the M-Class and Viking mines at Sugar Camp, the Mach 1 mine at Williamson Energy and the Shay No. 1 continuous mining operation near Carlinville, Illinois. Bailey Mine Posts Record Quarterly Production In its latest earnings statement, CONSOL Energy reported a net income of $71 million and cash flow from operations of $115.7 million. The company also reduced its debt by $26 million. The company said its capital spending plan calls for $20 million through 2019 in efficiency improvements. "We delivered very strong operational and financial perfor- mance as we completed our first full quarter as an independent public company," said Jimmy Brock, CEO of CONSOL Energy. "We outperformed most of our key guidance metrics and generated significant free cash flow, which gave us the confidence to accel- erate de-leveraging as well as initiate modest stock buybacks ear- lier than expected. "We strongly believe that our equity and debt are currently undervalued in the market place; therefore, we deployed some of our free cash flow to opportunistically repurchase portions of ev- ery category of our debt and equity that were issued or distributed in November 2017 as part of the spin-off process." Brock said the strong quarterly performance was driven by record production from the Bailey mine and improved coal prices in the domestic thermal coal markets. The Bailey mine produced a record-setting 3.8 million tons in the first quarter, surpassing its previous high mark of 3.5 million tons set in the fourth quarter of 2016. "This quarter was a testament to our differentiated marketing strategy, which enables us to capture significant pricing upside Continued on p. 8... Continued from p. 6... the current year considering lower domestic production and fall- ing international prices. While official government figures aren't yet available, industry estimates indicated that India imported 217 million metric tons (mt) of coal during 2017-2018, up 14% over the previous fiscal year reversing the 5.6% fall in 2015-2016 and 4.5% fall in imports during 2016-2017. Analysts with thermal power companies reckon that the rising import trend would sustain and gain momentum during the current fiscal year and grow by a range of 5-10% against the backdrop of slowdown in production growth by domestic government miner, Coal India Ltd. (CIL), accounting for more than 80% of domestic supplies of coal. The import imperative for thermal power companies was also expected to get more compelling with the country's demand for electricity increasing by 6% during April 2017-January 2018, almost double of that during the previous year. It was also pointed out that Chinese restrictions on import of coal at several ports and resultant softening of international coal price would provide an attractive window for Indian thermal power companies to step up imports to get around domestic fuel shortage. According to provisional data, CIL achieved a production of 567.37 million mt during 2017-2018, a growth of just 2.4% and missing the production target of 600 million mt set by the govern- ment. Despite missing growth targets, the government has set CIL a new target of 630 million mt for the current fiscal, representing a growth of 5%. According to data available with the Central Electricity Au- thority, as of early April, 22 thermal power plants across the country were facing coal shortages with 11 plant having stocks equivalent to seven days of consumption categorized as "critical stocks" and another 11 with coal stocks of less than four days equivalent con- sumption, categorized as "super critical stocks." The changing dynamics of landed price of imported coal in India, following Chinese import restrictions, was expected to throw a lifeline to such fuel-starved thermal power plants. Estimates done by private Indian thermal power companies show that grade G11 coal offered by CIL and roughly equivalent to ex-Indonesian imported coal, was priced by the Indian miner at around $17/mt (at current rupee-dollar exchange rate), which in- cludes various levies and taxes added up to $34/mt at the plant site. However, if the same fuel was sourced through e-auctions conducted by CIL, instead of long-term sourcing agreement be- tween the power producer and the miner, the price at thermal power plant site was 40% higher. In contrast, the landed price of Indonesian coal at Indian ports was currently prevailing at around $50/mt, making imports a viable option to fuel-starved power producers. At the same time, taking note of India's imminent rise in coal import shipments, and the possibility of India making up for the slack in global demand in the wake of lower Chinese imports, Pea- body Energy, backed by the U.S. government, is consolidating its presence as a supplier of fuel in India. U.S. Department of Energy Secretary Rick Perry during his visit to India last month said the government "was pleased that India has resumed coal imports from the U.S. and energy exports to India would help the U.S. government cut its trade deficit with the country." Peabody, too, was banking on higher supplies to India to con- solidate its financial turnaround. "India's rising imports is nearly offsetting reduced demand from China," Peabody Energy President

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