One of those areas is the high-sulfur Illinois Basin. Rhino planned to start preliminary development this spring on its first IB mine, the Pennyrile underground operation in western Kentucky. Rhino has agreed to supply 800,000 tons annually from Pennyrile to an unidentified regional electric utility through 2017, with a contract re-opener for 2018-2020. Rhino acquired the undeveloped mine, then known as Delaware, from Alpha Natural Resources about a year ago.

Down the road, Rhino still has a permit to develop a deep steam coal underground mine in Christian County, Ill.

During a March conference call with analysts to discuss earnings, Rhino said its total met and steam coal sales dipped from 4.9 million tons in 2011 to 4.7 million tons in 2012. The decrease was blamed on weakness in met and steam coal markets last year, primarily in Central App, driven mainly by an unseasonably mild winter in 2011-2012 along with an oversupply of low-priced natural gas. Both contributed to an increase of coal inventory supplies at electric utilities and fewer tons of steam coal used in electricity generation.

Rhino attributed the softer demand for met coal primarily to a decrease in worldwide steel production due to economic weakness in China and Europe.

Rhino’s decrease was partially offset by higher sales at the company’s Castle Valley underground operation in Emery County, Utah.

For the year ended December 31, 2012, Rhino’s total revenues fell to $352 million from $367.2 million in the previous year.

In Central App, Rhino’s coal revenues decreased by $41.6 million, or 20.3%, to $161.3 million in 2012, from $202.9 million in 2011.

In Northern Appalachia, the company’s coal revenues decreased modestly by $6.4 million in 2012, to $102.9 million, from $109.3 million in 2011. However, coal revenues per ton in Northern App increased by $1.87, or 3.5%, to $54.87/ton in 2012, versus $53/ton in 2011. The increase largely was the result of higher contracted prices for steam coal.

Meanwhile, coal revenues for its Rhino Western segment rose by $18.7 million, or 86.4%, to $40.4 million in 2012, compared with $21.7 million in 2011. Coal revenues per ton for Rhino Western were $38.89 last year, a decrease of $3.89, or 9.1%, from $42.78 in 2011. Rhino blamed the tonnage decrease on lower market prices for coal produced at its Castle Valley mine.

In 2012, Rhino said, its coal inventories increased by approximately 29,000 tons from 2011, due to weak demand in the steam and met coal markets.