“In both Central Appalachia and Rhino Eastern, we continue to focus on expanding our met coal production, and on decreasing our costs,” Dave Zatezalo, Rhino president and CEO, told analysts during a conference call in May to discuss first-quarter earnings. “In addition, we believe we have the most diversified base of projects and reserves of any coal company our size.” Rhino went public in the U.S. in 2010.
Rhino Eastern LLC is a joint met coal venture between Rhino and Patriot Coal in Raleigh and Wyoming counties in West Virginia. Rhino owns 51% of the partnership and is the managing partner. In April, the Eagle No. 1 mine near Bolt in Raleigh County resumed production after it was idled in mid-March because of flooding in a mined out area that was leaking into active workings below it. Eagle No. 1 produced more than 250,000 tons last year.
Zatezalo said the new Eagle No. 2 mine is scheduled to begin production before the end of June with a projected run rate of 200,000 tons a year. Rhino also has an agreement with Patriot to proceed with a new Sewell seam mine in mid-2012. In conjunction with Eagle No. 2, the partnership plans to construct a new prep plant.
In the Central App region, the Remining 3 surface mine in Rhino’s Tug River complex in eastern Kentucky and West Virginia is expected to begin operation in the fourth quarter this year, with a projected run rate of 375,000 tons annually. Output should double within 12 months, Zatezalo said. Met coal is expected to account for at least half of the mine’s production. Rhino intends to ramp up the mine’s production to coincide with the opening of a new Tug River prep plant in the first quarter of 2012.
Meanwhile, the new Access Energy mine in Rhino’s Deane complex in eastern Kentucky is expected to commence production in the third quarter this year, with an initial projected run rate of 175,000 tons annually of high-quality steam coal.
Zatezalo said Rhino continues to make progress with a permit for its Leesville mine in Ohio. The partnership also has identified an “interim opportunity” to access additional reserves from its existing Hopedale portal and infrastructure in Ohio. This may give Rhino the opportunity to access reserves similar in quality to Hopedale at a lower capital and operating cost than projected at Leesville, he said.
Earlier this year, Rhino launched production at its new Castle Valley underground mine in Utah, a property it acquired in August 2010 in C.W. Mining’s bankruptcy case. Rhino controls 26.7 million tons of proven and probable reserves at the complex in Emery and Carbon counties. Late this year, Rhino plans to reopen the McClane Canyon deep mine near Loma, Colo. The mine was idled in late 2010 after a sales contract expired.
