Foresight Energy is permanently closing its troubled Deer Run longwall mine in Illinois, a little more than three years after a combustion event dimmed what once was seen as a bright future for the mine near Hillsboro in Montgomery County.
The St. Louis-based subsidiary of Ohio’s Murray Energy Corp. told the federal Securities and Exchange Commission in an April 13 filing that Deer Run will be shuttered for good after terminating a lease agreement with WPP LLC. Under that arrangement, Deer Run leased certain mineral rights from WPP for 20 years with a renewal option for five additional terms, with a maximum of six terms.
As a result, Foresight said it expects to record an aggregate impairment charge of $134 million to $172 million in the second quarter of 2018, a move likely to have a major dampening effect on earnings.
The partnership said that, aside from permanently closing Deer Run, certain long-lived assets “including mineral reserves, buildings and structures, machinery and equipment, and other related assets are not expected to generate future positive cash flows.”
It was not supposed to be this way. Once one of the most promising of Foresight’s assets, Deer Run had just wrapped up its best year in 2014 when it produced 5.5 million tons of steam coal when the mine was ordered closed by the federal Mine Safety and Health Administration on March 26, 2015, after elevated levels of carbon monoxide were detected.
That triggered a multi-year effort by Foresight to find and eliminate the cause of the CO exceedances. Deer Run produced only 1.8 million tons in 2016 and virtually nothing in 2017 and 2018. During that time, Foresight was acquired by Murray Energy, the largest privately owned coal company in the U.S.
Early this year, Foresight received MSHA approval to essentially perform any work it chose in Deer Run, except mining coal.
Gary Broadbent, Murray’s senior corporate counsel and director of investor and media relations, said he had no comment beyond the SEC filing.
