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World Coal
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June 2015
Coal News
Coal News
A
new report from West Virginia
University’s Bureau of Business
and Economic Research (BBER) suggests
that a combination of economic,
environmental and regulatory factors
will cause a 39% reduction in state coal
production by 2035 from its 2008 high.
“Coal is so important to West Virginia
– to our output, income, history and even
our identity,” said John Deskins, Director
of the BBER. “It is vital that we
understand the recent decline in coal
output and why it has occured.”
The report – ‘Coal Production in
West Virginia: 2015 – 2035’ – details the
significant challenges facing the industry
today as weak export demand, declining
domestic use of coal, changes in
emissions compliance standards for
power plants and increasingly difficult
geological conditions in the south of the
state have led to large declines in
production in recent years with further
drops expected.
After reaching 158 million short t in
2008, West Virginia’s coal production has
slumped to 115 million short t in 2014 and
is expected to contract further to
98 million short t in 2016. Amodest
recovery between 2017 and 2020 will be
followed by further production falls with
output dropping to less than
96 million short in 2035. This downward
trend has been much more significant
when compared to most other coal-
producing regions in the US.
The bad news is not, however, evenly
spread, as Deskins was keen to point out:
“One fact that many people do not realise
is that the decline in coal production has
not occured evenly accross the sate,” he
said. “The recent decline has been entirely
driven by a drop in southern West Virginia
coal output, while production in the
northern part of the state has actually risen
in the past few years.”
Deskins attributes this divergence to
lower levels of productivity in the
southern part of the state, leading to
higher production costs. As a result, coal
output from the southern regions of
the state has dropped from
117 million short t tin 2008 to less than
63 million short t in 2014 – a drop of 46%
on a cumulative basis.
In contrast, coal production in the
north of the state has jumped 8% per year
between 2011 and 2014, hitting an
estimated 53 million short t last year – the
highest level of production since 1991.
USA
West Virginia coal production will contract by 39% by 2035
B
ankrupt US coal miner,
Patriot Coal, has filed a
letter of intent for a proposed
sale of a substantial majority of
its operating assets to Blackhawk
Mining with the Bankruptcy Court,
as well as a motion outlining bidding
procedures, according to a company
press release.
“The contemplated transaction
would be consummated pursuant to a
Chapter 11 plan and is subject to
documentation of a definitive asset
purchase agreement, bankruptcy
court approval of the sale,
confirmation of a Chapter 11 plan
and other customary conditions,” said
the company. “Patriot’s mining
operations and customer shipments will
continue in the ordinary course during
the sale process.”
Under the terms of the sale,
Blackhawk would issue to Patriot’s
secured lenders new debt securities
totaling approximately US$643 million
plus Class B Units, providing them an
ownership stake in Blackhawk. In
addition, Blackhawk would assume or
replace surety bonds supporting
reclamation and related liabilities
associated with the purchased assets.
“We feel strongly that the proposed
transaction with Blackhawk is in the
best interest of Patriot and its
employees and stakeholders,” said
Bob Bennett, President and CEO of
Patriot. “This transaction creates a
viable path forward in this challenging
market environment, enabling our
mining operations to continue serving
customers and preserving jobs in the
communities in which they operate. As
always, we remain committed to
operating safely and serving our
customers throughout this sale
process.”
Elsewhere, Rhino Resources Partners
has announced that it plans to idle its
Central Appalachian operations, while
Teck Resources will temporarily
shutdown its Canadian operations, in
light of continued weakness in the coal
industry. “Rather than push incremental
tonnes into an oversupplied market, we
are taking a disciplined approach to
managing our mine production in line
with market conditions,” said
Don Lindsay, President and CEO of
Teck Resources. “We will continue to
focus on reducing costs and improving
efficiency to ensure our mines are
well-positioned when markets
improve.”
NORTH AMERICA
Patriot Coal finds buyer for assets, while others continue to shut mines
