Desperate Times, Desperate Measures

Weak prices, increasing costs and historic flooding force Powder River Basin ops into survival mode

by jesse morton, technical writer

On July 1, the owner and operator of the Eagle Butte and Belle Ayr mines in Wyoming, Blackjewel LLC, and its sister company Revelation Energy LLC, filed for Chapter 11 bankruptcy. In the weeks that followed, the bankruptcy proceedings, the negotiations, and the human cost of it all, would at times make primetime news and become talking points for major league politicians and corporate news anchors.

Local reports described the events as unprecedented in part due to the speed at which they occurred, but also because of the moves made by the players. Encapsulated in the chain of events is not only the ground truth about the aging mines of the Powder River Basin (PRB) and the challenges facing the big corporations bound to them, but also how the men and women who work there cope with the uncertainty that now dogs their careers.

The timeline also reveals something that local and national news reports have been hesitant to describe, and that is the shell game some companies attempt to escape from some of the costs of operating in the sector. While most of the companies operating in PRB have not made moves identical to those made by Contura and Blackjewel in the recent past, they have faced the same market forces, have been dealt similar hands, and ultimately could face similar fates.

No Escape

When Blackjewel and Revelation Energy filed for bankruptcy the exact day after Q2 2019 officially ended, a bankruptcy that lawyers would claim was unforeseen, the pair owned and/or operated 32 coal mines in the U.S., shared the same CEO, Jeffery Hoops, and were organized so that he could transfer mines between them.

Combined, the companies reportedly owed $500 million, which included $82 million in taxes and fees to government agencies. The companies also owed tens of millions to private debtors. The primary secured creditor was Riverstone Credit Partners, who, as the proceedings would reveal, was ultimately owed more than $40 million.

Hoops told the press the company needed cash to operate and to pay wages and benefits, but that he was confident restructuring would “solidify Blackjewel’s position” in the market. Adverse market conditions dating back to 2012 were blamed for the bankruptcy.

About 700 workers were locked out as the two PRB mines were idled.

On July 2, at emergency bankruptcy proceedings, a Blackjewel lawyer reported a fire at one of the two PRB mines. The development highlighted the dire need for swift approval of emergency funding by the bankruptcy court, it was argued.

A Wyoming environmental agency employee confirmed spontaneous combustion had occurred, but the state was able to handle it. A federal attorney said the miner created the emergency, according to a local report.

That day, Blackjewel lawyers sought court approval for a $20 million loan from Clearwater Investment Holdings, which is linked to Hoops. Reportedly, previously, Hoops had personally loaned Blackjewel $11 million.

The judge declined to approve the $20 million loan, but later approved a $5 million loan from Riverstone to bankroll maintenance at the mines. An additional loan for $2.9 million was approved two weeks later. Reports on the latter stated the interim loans could be used in part to pay salaries, benefits, and vendors, which, at that point, when combined were owed $2.7 million.

Hoops resigned as part of the deal to get the interim funding.

Ultimately, roughly 140 employees were brought in for care and maintenance work.

As the court proceedings progressed, the unemployed workers became increasingly vocal about their desire to return to their jobs and be paid for previous work.

News reports stated some employees reported that, going back six weeks, the company had been withholding making deposits into its 401(k) plan and health savings account.

On July 10, a Blackjewel employee filed a class-action lawsuit against the company, alleging the company violated federal law by failing to provide 60 days advance written notice to workers prior to closing the mines and failing to offer 60 days of wages. One report stated Blackjewel owed employees $1.6 million in wages and retirement funds.

The law governing layoffs has exceptions for unforeseeable business circumstances. Whether it is possible for an economic trend dating back a half-decade that is admittedly the cause of the bankruptcy can produce unforeseeable business circumstances will be sorted out by lawyers.

On July 26, Blackjewel motioned for the court to recognize Contura Energy as the stalking horse bidder for the PRB mines and the Pax surface mine in West Virginia. Already with strong ties to the mines and indirect ties to Hoops, as will be discussed later, Contura put down $20.6 million in cash as a deposit. At least $8.1 million of it was made immediately available to go to Blackjewel’s expenses.

According to the bid, Contura would assume none of Blackjewel’s liabilities, apart from those associated with reclamation-related obligations, which Contura already held, as will be explained later. The majority of employees would return to work. Contura, however, would not continue with the employees’ retirement plans.

Bidding was set to continue for at least a half-week.

The Contura bid was described by the press as likely the only deal that would have allowed Blackjewel and Revelation Energy to avoid filing a Chapter 7 bankruptcy liquidation. And the two would still have to find funding for its other mines, which, combined, employ roughly 1,000 workers.

That same day, Blackjewel moved to nix the company’s 401(k) programs. It would no longer contribute to the accounts, but the account holders would not lose the money previously accumulated.

In the days that followed, the court heard concerns that the unpaid wages, benefits, royalties, and taxes would impact the state and county’s balance sheet, to the detriment of government services, projects and schools. Other parties stated the bid could mean the abandonment of reclamation liabilities at Blackjewel’s other idling mines.

The court then moved to consider bids that did not include assuming reclamation-related liabilities, which the court admitted would not be legal.

On July 29, Contura announced it appointed David Stetson as CEO and board member. Its previous CEO had departed in May, at likely the same time it would become undeniable to Hoops that his companies were insolvent.

Previously, Stetson served on the Contura’s board of directors. His resumé also included a stint as CEO of Alpha Natural Resources (ANR) back when it owned the two PRB mines and went bankrupt and spun off Contura, as will be described later.

Curiously, Stetson also held an executive leadership position at Trinity Coal Corp. Hoops was a principal (board member) at Trinity Coal Partners, which, after restructuring, became Trinity Coal Corp. The latter company has the same office address as the former.

The connection between Stetson and Hoops, through Trinity Coal, and the timely departure of Contura’s CEO should raise more questions than it has thus far. It’s possible significance will be spotlighted as the timeline progresses and is put in its needed historical context.

On July 30, some former employees of Blackjewel and Revelation Energy in Harlan County, Kentucky, with the support of locals, protested the abrupt closure of the mines and the lack of pay and benefits by blocking a railway. The protests ran almost continuously, for weeks, with miners and family members operating in shifts.

More than 170 employees from the county are owed at least $664,000 for work in June, news reports revealed.

In the first week of August, Riverstone submitted a bid of $20 million, credit, for the Wyoming mines. The move was strategic. If it won, it would likely have shuttered the mines, leaving Contura on the hook for reclamation work, which would have required new equipment.

The move worked, and prompted Contura’s second bid, at $33.75 million.

Of that, Blackjewel could transfer $24 million to Riverstone along with more than $16 million in royalties. Unsecured creditors, like government entities, would have to weigh in as negotiations wound down, to be paid anything.

Local news coverage, however, reported it was possible Contura, if it won out, would not reopen the mines for any real length of time. The company referred to the two PRB mines as discontinued operations in its quarterly financial report.

The other Blackjewel and Revelation Energy assets received from a handful of companies bids totaling $59.44 million.

That same day, some of the Kentucky miners and protestors caravanned to Charleston, West Virginia, to attend the proceedings. In court, the federal labor department weighed in, alleging the company violated labor law. Blackjewel agreed to not spend any of the money coming in from sales of coal at its Harlan County operations until workers there are paid.

The next day, a federal judge approved Contura’s bid.

Initially, Contura reported it would rehire roughly 500 workers at the two PRB mines and launch a $5 million benefit fund for them.

But federal approval was slow in coming. After the federal judge approved the sale, the government leveled objections based on outstanding royalty payments and on leasing terms, bogging down the process. Negotiations spanned days.

Around that time, Kopper Glo appeared set to acquire the Kentucky mines (Black Mountain and Lone Mountain). The company pledged $450,000 for back wages. The miners were instructed by their lawyer to file a lien to get the rest.

Jewell Valley Mining LLC appeared a lock to buy 11 Virginia assets, to include three underground mines, a rail facility and a plant.

On August 16, Blackjewel filed a motion that it wouldn’t ship coal from Virginia operations until workers there received backpay.

In the last week of August, with the sale to Contura still being negotiated, Blackjewel filed a motion to terminate the medical plan Revelation Energy purchased. It meant former employees wouldn’t be able to continue their coverage.

Things appeared to be taking a turn on August 27 when Riverstone filed a motion that stated it and Contura had abandoned the latter’s bids. After the bankruptcy hearings, Contura was apparently on the hook to operate the PRB mines for a minimum of six years. Amid the negotiations, the miner’s plans to operate them for as little as six months and then close them surfaced. That torpedoed the negotiations with the federal government over royalties.

Blackjewel then petitioned the court to allow it to sell the West Virginia mine separately. The court agreed and Contura was set to pay $1.1 million in cash for it.

In the motion, Riverstone asserted the development nullified it’s part of the settlement. Some observers described the motion as an attempt by the creditor to goad Contura.

The bankruptcy caps five years of adversity for the two PRB mines, with multiple companies successively challenged to figure out how to make them profitable. ANR tried first, failed and in 2016 spun off Contura, which then became tethered to the two mines such that they could neither turn a buck off them nor escape fully from them.

Coal prices never returned to the anticipated heights and, in turn, in Q2 2017, Contura retracted an application with the state to expand Belle Ayr. It also revised downward its guidance for the year. The outlook had darkened for the two mines.

With that information available to the public, it would be a curious time for someone to make an offer on the mines. And that is exactly what happened.

After launching Revelation Energy, Hoops created Blackjewel in July 2017 and acquired a number of Appalachian coal operations. The company registered for a license with the state of Wyoming in December 2017.

At the time, local news sources described the company as a speculator.

While there may be some truth to this, it should be noted that, as mentioned, Hoops is connected to Stetson, currently the new CEO at Contura, through Trinity Coal, where both were members of the C-suite. Perhaps that is just a coincidence. It is, after all, a small world at the top. In effect, though, in the end, history may prove that Blackjewel wasn’t so much a speculator as it was a fall guy. Whether witting to it or not, Hoops effectively proved to be front man in a failed attempt to absolve Contura of its ties to the PRB.

Either way, the state, it would seem, was having none of it.

In early December 2017, Contura reported it sold the Eagle Butte and Belle Ayr mines to Revelation Energy. Apparently eager to get out, Contura reportedly took a book loss on the sale, which was pegged at roughly $50 million in royalty payments. Revelation Energy was in line to assume from Contura about $200 million in undiscounted reclamation obligations and as much as $450 million in tax obligations for 2017.

Later reports would state Contura paid Revelation Energy more than $20 million to take over the mines and their liabilities in what was described as a no-cash sale.

Local reports stated Contura jettisoned the mines to offload unwanted liabilities.

Alas, the state had the final say. It was the final authority that could approve or deny the reclamations-related permits transfer. Only it could set Contura free.

It wouldn’t.

As of this writing, Blackjewel had the license to mine coal in Wyoming while Contura still had reclamation-related permits and thus the liabilities related to reclamation obligations. Revelation Energy and Blackjewel reportedly never submitted a bond to Wyoming’s environmental agency to get the permits from Contura.

Hoops would tell the press he had the money for the bond. Complicating matters, the permit transfer reportedly also hinged on Wyoming’s environmental agency reviewing alleged environmental violations by Revelation Energy in Appalachia. Contura, meanwhile, maintained sufficient bonding to cover the reclamation and other obligations, and so remained on the hook.

The shell game continued. Shortly after the acquisition, ownership of Belle Ayr and Eagle Butte was transferred from Revelation Energy to Blackjewel.

In Q2, 2018, Revelation Energy was sued by Fifth Third Bank of Ohio for allegedly transferring the mines while the miner was in default on two loans, one for $20 million and one for $5 million. Revelation Energy allegedly owed the bank $7 million in back payments. The mines were collateral for the loans, according to the bank. According to a previous contract, the mines could not be transferred if the miner was late on a payment.

Hoops told the press the bank’s claims were false.

A couple months later, Hoops was sued by Pocahontas Resources LLC over alleged unpaid royalties and alleged fraud.

Hoops denied the allegations and said Pocahontas Resources failed to fulfill part of the contract, causing the mine in question to underperform.

The 2017 acquisition of the PRB mines by Revelation Energy meant that employees at the mine had worked for three different companies in a little more than a year. While Hoops and Contura attempted something of a shell game, the people working the mines kept production numbers respectable, among the highest in the nation.

And, to their credit, corporate leadership kept mine employment numbers relatively high.

According to MSHA, the combined H1 2019 production at Blackjewel’s PRB operations was up 4% over the same period last year, and up roughly 6% over H1 2017. Annual production rose roughly 7% yoy in 2018, but was off about 29% from the peak in 2011.

At the close of Q4 2018, mine site employment was at a record high at the Eagle Butte mine. By the close of Q2 2019, it had dropped 5%, but was still a bit above the average for the preceding 10 years.

By the close of Q2 2019, employment at Belle Ayr was at roughly the average for the preceding 10 years, and down 26% from the all-time high for the mine, set in 2009.

Blackjewel and Revelation Energy were not publicly traded companies. The information on their operations is thus not public information. In the PRB, a couple giant publicly traded corporations operate, as does a nonprofit. Their information is available, and the transparency ensures their story is different.

Yet, it is not that different. The struggle to make a buck these days in PRB puts them all in the same boat, a life raft really. However, they are not all positioned the same. Cannibalism is an ever-present threat. The survival strategies of each company reflect the viability of the mines they operate. At the oars, Cloud Peak, for example, would be seated next to Contura and in front of Peabody, who, it would seem, has the commanding view and the sextant.

Exit Stage Left: Cloud Peak

Production at the three PRB operations mined by Cloud Peak Energy (CPE) has been in decline since late 2012. In H1 2019, that trend continued unabated, with two hitting the lowest quarterly production totals in more than two decades. The milestone was a harbinger. CPE has declared bankruptcy, sold the mines, and entered PRB history.

The writing was on the wall. Its annual report showed CPE lost $700 million in 2018. In late March 2019, CPE was notified by the New York Stock Exchange (NYSE) that its common stock would be delisted due to its low-price levels. On May 10, CPE filed for Chapter 11 in the U.S. Bankruptcy Court for the District of Delaware. The company president stated that “a sale process in Chapter 11 will provide the best opportunity to maximize value.”

The courthouse auction for CPE’s assets was delayed twice. During the proceedings, the mines operated. The company paid wages, salaries, benefits, vendors, suppliers and providers.

On August 19, a judge approved the sale of CPE’s mines to Navajo Transitional Energy Co. (NTEC), owned by the Navajo nation and based in Farmington, New Mexico, for $15.7 million in cash. NTEC will take on CPE’s debts, royalty payments, and reclamation obligations.

NTEC owns the Navajo mine, which feeds the Four Corners Power Plant. The company did not need a financial house to bankroll the acquisition of the PRB mines. It agreed to pick up the tab run up by CPE during the proceedings and to pay the $8 million CPE owed in taxes to Campbell County.

The deal makes NTEC the third-largest coal producer in the U.S. As a Native corporation, NTEC has a favorable tax status, according to observers, who said that could help it make ends meet in the PRB.

Within about a week of the deal, Montana officials approved plans to expand the Spring Creek mine. The project will target 72 million tons and is expected to tack on four years to the life of the mine. It was a nod from officialdom and a positive headline after weeks of brooding by the press.

No doubt, if recent history is any indicator, it will likely take more than good tidings, positive PR and lower taxes to make the numbers work at the three PRB mines formerly owned by CPE.

In Q1 2019, CPE revenues fell a staggering 33% from the same period last year. Capital expenditures were off 78%. Before tax losses for Q1 were $50 million. The total loss for the quarter was $52 million. Such losses were becoming normal.

Coal shipments in Q1 2019 decreased by roughly 18% from the same period last year. The dropoff due to weather aligned with a bigger trend. Mine shipments in 2018 were off more than 15% year over year, which the company partly attributed to heavy rain at the Antelope mine in Q2 2018.

History will reveal that CPE’s mines, as they went deeper over the years, were plagued by overburden-removal cost increases, specifically related to diesel fuel prices. The costs would prove to be a factor in the company opting to restructure.

With its aging mines running deeper, the company was also locked into “significant” planned capital expenditures for equipment, surface land holdings, and coal reserve maintenance.

Whatever monies were saved in Q1 by somehow lowering labor costs and reducing benefits were partially offset by increases in costs for repairs, maintenance and blasting. “Repairs and maintenance increased as a result of running more haul trucks, as well as work done at our rebuild center on various draglines, dozers, dippers and buckets,” CPE reported. “Explosives increased as a result of an increase in overburden removal. The average cost per ton sold increased primarily due to the lower production and higher strip ratio.”

According to company reports, in 2018, CPE coal generated 2% of the electricity produced in the U.S.

At the close of 2018, CPE “controlled approximately 977.3 million tons of proven and probable reserves.”

Consolidation of the Fittest

One answer to falling revenues, declining production, and tightening margins could be to join forces with a neighbor experiencing the same and hope to save on transportation and management costs.

Thus, in June, Arch Coal reported the company will form a joint venture (JV) with Peabody and join their PRB and Colorado assets. Arch’s Black Thunder mine and the neighboring North Antelope Rochelle mine (NARM), operated by Peabody, both located in Campbell County, Wyoming, will be combined “into a single, lower-cost complex,” Arch reported.

Prior to the JV, NARM was already the biggest coal mine in the world, according to Peabody.

The other assets involved include Arch’s West Elk Mine and Peabody’s Twentymile Mine in Colorado; and (Peabody’s) Caballo, Rawhide and (Arch’s) Coal Creek mines in Wyoming.

The combined H1 2019 output for the five Wyoming mines accounted for about 59% of the combined output of all the PRB mines for the period.

Peabody will own 66.5% of the JV.

The move is “expected to create one of the lowest-cost thermal coal suppliers in the U.S. to strengthen competitiveness against natural gas and renewables,” the company reported.

A five-member board of managers appointed by Arch and Peabody will run the JV. Voting rights, profits, capital requirements and cash will be divided according to ownership percentages. “Peabody will manage all activities including the marketing of coal,” Arch reported.

What the miners call JV synergies could total $820 million. Expected synergies include optimization of mine planning, improved efficiencies, optimized warehousing, improved utilization of rail systems, reduced long-term capital requirements, and shared services.

According to corporate reports and MSHA, in H2 2018 and H1 2019, Arch PRB operations’ metrics mostly aligned with the prevailing trends, seeing flat or rising costs, flat or falling prices, and generally declining production. Employment at Black Thunder ticked upward, while it dropped precipitously to lows not seen in more than a decade at Coal Creek.

In Q2 2019, Arch’s PRB mines sold roughly the same amount of coal as in Q1. They sold roughly 9% less coal than they did in the same period last year. They received roughly a dime less per ton than they did in Q1 2019. And their Q2 costs per ton were up about a quarter per ton. “Coupled with a modest decline in average realization, the segment’s per-ton operating margin declined by 34% to $0.79,” according to Arch.

Arch attributed the flat sales to flooding and the cost increases to higher fuel prices.

Combining the production figures from both quarters brings some clarity.

MSHA numbers reveal Coal Creek mine H1 2019 production down 72% from the same period last year and down 77% from H1 2017. Black Thunder’s H1 production was off 3% from the same period last year, and down only slightly from H1 2017.

Mine site employment at Black Thunder has increased for three straight quarters, according to MSHA numbers. Still, in Q2 2019, it was off about 27% from the Q1 2012 high. At Coal Creek, mine site employment, having fallen 49% in Q1, was the lowest it has been since early 2006, and off by roughly 68% from the 1999 high.

Numbers from further back in time reveal sideways motion at best.

MSHA numbers show total 2018 coal production at Black Thunder rose roughly 1% yoy, but was off almost 11% yoy at Coal Creek. In 2017, production rose roughly 4% yoy at Black Thunder and almost 10% yoy at Coal Creek. The company reported overall PRB coal demand in 2018 was bolstered by the exports market.

Black Thunder had roughly 816.5 million tons of proven and probable reserves at the end of 2018, Arch reported. Coal Creek had roughly 94.7 million tons of proven and probable reserves.

According to MSHA numbers, production at both Arch PRB mines has been in decline for roughly a decade.

Arch Coal filed for and exited bankruptcy in Q1 and Q4 2016, respectively.

Peabody has had a similar run of it.

It filed for bankruptcy protection in Q2 2016 and emerged from it roughly a year later. According to recent corporate presentations, since Q2 2017, the company reduced net debt by about 34%. It reduced total liabilities by $1 billion. It did this while managing to maintain roughly the same level of total liquidity yoy.

Those highlights have to be qualified against recent numbers. In the recent past, the company has seen revenues fall and production flatline. And company guidance has it doing more of the same.

In 2018, the Peabody’s PRB operations saw realized prices fall further than did the cost per ton, which was buoyed by increases in diesel and explosives costs. Thus revenues fell yoy; and production fell 3.8% yoy.

In Q1 2019, the company’s PRB operations logged revenues of close to $290 million, all of which came from coal that went to domestic customers. That is off roughly 26% from the same period last year.

Peabody’s PRB operations sold 25.3 million tons of coal in Q1 2019, down a whopping 22% from the same time last year.

Realized price per ton for Peabody’s PRB operations for Q1 2019 averaged $11.35, off 6% from the same period last year. Costs per ton averaged $9.91, up 2% from Q1 2018.

Driving down earnings in Q1 was “lower volume primarily attributable to railroad closures and delays that resulted from severe flooding across the upper Great Plains and lower net realized coal pricing, partially offset by lower costs for materials, services and repairs,” Peabody reported. Specifically, rail outages accounted for a 12% decline in coal production in Q1 2019.

MSHA numbers show total H1 2019 production at NARM off by 16% from the same period last year and down 17% from H1 2017. Production for 2018 was down 3% yoy.

Total H1 2019 production at Caballo was up more than 5% over the same period last year, and up roughly 7% over H1 2017. Production for 2018 was up about 2% yoy.

Total H1 2019 production at Rawhide was about the same as it was for the same period last year but off 14% from H1 2017. Production for 2018 was down about 8% yoy.

Total employment at Peabody PRB mine sites at the end of H2 2019 was close to 1,550, about 8% off the average for the preceding 10 years. Employment at NARM was slightly lower than the preceding 10-year average. At Caballo it was down 21%, and at Rawhide it was down more than 50% from the preceding 10-year average.

In May 2019, before the JV with Arch was announced, Peabody reported it expected its PRB operations to produce a maximum of 115 million tons at a maximum average cost per ton of $9.75 and an average realized price per ton of $11.25 in 2019. If it hits that target, it would be a 3% decline yoy in total production, and a decline of 7% from 2017.

As of the end of 2018, Peabody had proven and probable reserves in the PRB of 2.4 trillion tons. Of that, NARM accounts for 1.7 trillion tons.

Back From Bankrupcy

On March 15, 2019, Westmoreland Coal Co., which describes itself as “the oldest independent coal company in the United States” and which operates two mines in PRB, reported it emerged from Chapter 11 as a privately held company owned and operated by a group of its former creditors. The move had been approved by a bankruptcy court in Texas a half month earlier.

In the course of the bankruptcy, the company sold its assets to Westmoreland Mining LLC, which is now owned by the company’s creditors. “Westmoreland Mining’s assets will remain in operation under the same local leadership, and the business will continue operating in the normal course, preserving more than 1,000 jobs in the U.S. and Canada,” Westmoreland Coal Co. reported.

The company entered Chapter 11 in early October 2018.

Earlier that year, the company warned publicly it was weighing its options to stay afloat. It landed a $110 million loan in May 2018, which it reported bought time to negotiate with creditors “to develop a comprehensive restructuring plan.”

Shrinking demand had been hammering the company’s business model for years and was expected to continue. For example, in 2017, Puget Sound Energy announced plans to retire two coal-powered units at Colstrip power plant within a half-decade. The plant is a key customer for Rosebud mine. The plans changed as efforts to make the plant economically viable failed, and in Q2 2019, it was announced the units will be permanently closed by the end of this year.

Production at Rosebud has been in steady decline for more than a decade. MSHA numbers show Q2 2019 production down close to 50% from Q1, and 10% from the same period last year. The mine’s Q1 production was off 5% from the previous quarter and down 2% from the same period last year. Rosebud mine produced 3% less coal in 2018 than it did in 2017.

Employment numbers at Rosebud for H1 2019 hovered a bit below the all-time highs set in 2016.

Production at the Kemmerer mine has been basically flat, hovering around 1 million tons per quarter, for almost the entire duration of its operations. The last few years, however, have brought a gradual decline. MSHA numbers show Q2 2019 production at the mine off by 2% from the previous quarter and down 10% from the same period last year. The mine’s Q1 2019 production was off by 30% from the previous quarter and down 20% from the same period last year. Kemmerer produced 5% less coal in 2018 than it did in 2017.

Employment numbers at the close of H1 2019 for Kemmerer were the same as Q3 2012, effectively the lowest on record for the mine.

Other timely details pertaining to operations, costs and reserves were not available.

Entering ‘Challenging Times’

The nonprofit co-op Western Fuels reported its Dry Fork mine saw an increased strip ratio in 2018 and declared such a harbinger of lean times ahead. The mine previously had one of the lowest strip ratios in PRB, according to company reports. Last year “marked the first year the mine began to see that number increase,” Western Fuels reported. “By the year 2023, the strip ratio will have increased by over 40%.”

The strip ratio is set to skyrocket because the mine’s lone low-strip-ratio pit is being shuttered. What the company referred to as Pit 1 was “mined out by mid-2018,” the company reported. The two newer pits not only have a higher strip ratio but are further from the important tip points. That means longer haul distances and higher operating costs. “Adding to this dilemma, third-party coal prices were depressed during 2018 for Dry Fork mine, and are projected to be depressed in the coming years,” the company reported.

Lower third-party coal prices and sale volumes prompted the miner to raise prices to its “primary” power company customers, the Laramie River Station and Dry Fork Station.

The company reported it bought a couple loaders in the last half decade and expects no major capital expenses in the upcoming years. That and various process improvements recently have reportedly positioned the mine well for what the company calls the “challenging times” ahead.

The mine shipped 6.3 million tons in 2018 and boasts of the “second most productive mine of the 12 mines in the PRB when measured on a tons-per-man-hour basis.”

According to MSHA numbers, production at the mine has, in general, trended upward for the past decade. Recently, though, the numbers are off.

Dry Fork’s Q2 2019 production was down 2% from the preceding quarter and down 9% from the same period last year. The mine’s Q1 production was down 3% from the prior quarter and down 20% from the same period last year. The mine produced 4% more coal in 2018 than it did in 2017. Employment numbers at DFM are at an all-time high.