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Paringa Breaks Ground on New Poplar Grove Mine


Paringa Resources Ltd., the newest entrant in the Illinois Basin (ILB) steam coal market, began construction in August on its 2.8-million-ton-per-year (tpy) Poplar Grove underground steam coal mine, the first of two deep mines planned by the Australian company for its extensive Buck Creek reserve in western Kentucky. Site work got under way in the McLean County/Hopkins County area near the Green River less than 18 months after the company flip-flopped its original plans and decided to build the low capital expenditure Poplar Grove mine before the 3.8-million-tpy Cypress mine.

Current plans call for Poplar Grove to produce its first coal around mid-2018, and ramp up output from both the western Kentucky Nos. 9 and 11 seams by the end of 2020. Depending on market conditions, construction could start on the fully permitted Cypress mine in early 2019. Poplar Grove is expected to have a mine life of 25 years; Cypress a life of around 18 years.

Under an amended “cornerstone” sales agreement, Paringa is contracted to deliver a total of 4.75 million tons of 11,200 Btu/lb product from Poplar Grove over a five-year period, starting in 2018, to Louisville Gas & Electric Co. (LG&E) and Kentucky Utilities Co. (KU), the state’s largest electric utilities and subsidiaries of Pennsylvania-based PPL Corp. LG&E and KU serve more than 1.1 million customers and own four major coal-burning power plants in the commonwealth.

The LG&E/KU contract begins at $40.50/ton for the first 750,000 delivered tons, escalating to $45.75/ton for the final 1 million tons sold. The vast majority of Poplar Grove’s 2018 production is earmarked for LG&E/KU, although some tons will be reserved for test burns at other utilities.

As Paringa moves through the construction phase and nears first coal from Poplar Grove, it plans to begin participating actively in the coal solicitation process to sell additional coal to electric utilities located in the Ohio River market. Eventually, the company also intends to aggressively target coal sales to the secondary Southeastern market.

The Southeastern market traditionally has been supplied by coal producers in Central Appalachia, although ILB producers — notably Hallador Energy and Foresight Energy — have made inroads there in recent years.

Paringa, which is listed on the Australian Securities Exchange and OTCQX and operates through its 100% owned U.S. subsidiary Hartshorne Mining Group LLC, hopes to replicate the success of its local peers, including Alliance Resource Partners, arguably the most profitable coal producer in the ILB.

“We will be mining the same coal seams as they do, using the same mining methods, mining equipment and coal processing,” Paringa said in a statement, referring to the region’s high-sulfur coal producers. Both Poplar Grove and Cypress will use the room-and-pillar method featuring continuous miners that are prevalent in the ILB.

Paringa added it aspires to become a “midtier” producer in the region “and will do so via our internal project pipeline (Cypress) as well as considering acquisitions.”

Paringa said it was drawn to the western Kentucky part of the ILB because of the quality of the coal, the dynamics of the region’s market and the inherent infrastructure and transportation advantages. It plans to make heavy use of the nearby Green River, a deep, navigable waterway that empties into the Ohio River less than 30 miles from the mine site.

Since 2008, the previous vendor group and Paringa have secured a total of 304 individual leases, comprising more than 510 individual property tracts, and covering an area of almost 40,000 acres that holds more than 100 million tons of marketable coal reserves in western Kentucky. Paringa’s U.S. subsidiary secured the Buck Creek mine complex in 2012, which includes both Poplar Grove and Cypress.

Paringa credits the administration of U.S. Republican President Donald Trump, a strong supporter of the coal industry, for its decision to move the Poplar Grove project to the construction stage. “Without the Trump administration ending the ‘war on coal,’ we would not be building out this mine,” the company said. “The administration has been effectively removing barriers and regulations that were
unfairly punitive for the coal industry.”

The company said it also supports the ongoing efforts of Scott Pruitt, administrator of the federal Environmental Protection Agency, for his focus on removing “job-killing regulations such as the Waters of the U.S. rule, the Clean Power Plan and the ELG [Effluent Limitations Guidelines]. The administration understands there was a false narrative perpetrated by the environmental lobby and the previous administration that Americans must choose between clean air and economic growth.”

Grant Quasha, Paringa’s managing director and CEO, said he believes the next 12 months will be “very exciting as we progress through the construction phase and toward first coal production, advance negotiations with utilities located within the Ohio River and Southeast markets potentially leading to additional sales contracts, continue discussions with advisers for a potential listing on major U.S. stock exchange and begin to roll out our public relations and digital marketing campaign throughout North America.”