Taking a different approach, Iron Senergy converts liabilities into opportunities
by steve fiscor, editor-in-chief
A little more than a year ago (December 10, 2020), Iron Senergy closed on its acquisition of the Cumberland mine from Contura Energy. Acting on a hunch, Justin Thompson, Iron Senergy’s owner and chief executive officer, formed the company in mid-2020 and struck a deal with Contura to take the Cumberland mine and its related assets located in Greene County, Pennsylvania.
Thompson, who has navigated the coal industry since returning from active duty in the U.S. Air Force in 2004 where he served for more than four years as a mechanic with the 4th Fighter Wing, had been looking for a unique acquisition opportunity within the coal industry. “I have always tried to view every challenge as an opportunity to evolve,” Thompson said. “The coal and energy industry must evolve to meet the needs and demands of society. We can’t expect a political or external solution to our energy challenges. Innovation balanced with calculated risk is the only practical solution. One that respects and values the contribution by all team members and the role that we play in a community is the real answer. That is exactly what defines me and Iron Senergy.”
Thompson’s experience in the energy industry includes employment with a Cat dealership in field service, completing a bachelor’s degree in mining engineering, and subsequent employment with several large-scale coal producers in engineering and production management roles, a publicly regulated utility in fuel procurement, an international steel company in raw materials sales and logistics, and a variety of small coal trading ventures. This unique experience allowed Thompson to develop a clear vision of how he wanted to build a diversified and transitional energy company capable of unlocking value in existing assets and repurposing liabilities. “I view every expense and every decision as an opportunity for investment and improvement,” Thompson said.
The deal between Iron Senergy and Contura Energy was a win-win for both companies. Through the transaction, Iron Senergy acquired a proven longwall operation with access to the inland waterways and approximately 500 million tons of Pittsburgh No. 8 coal reserves, and Contura Energy was able to transition to a pure-play metallurgical coal producer and rebrand itself as Alpha Metallurgical Resources. In addition to the Cumberland mine, Iron Senergy also inherited the closed Emerald mine, a limited tailings storage facility, a 17-mile short line railway, which it owns and operates, as well as the Alicia harbor and the Labelle transloading facility, both of which are located along the Monongahela River. All of Cumberland’s coal is transported 17 miles from the mine to Alicia Harbor where it is loaded on to barges. Some of that production can also be offloaded at the Labelle facility where it can be transloaded to a Class 1 railroad.
Most importantly, Iron Senergy acquired a skilled and dedicated workforce of more than 700 individuals, including miners represented by Local 2300 of the United Mine Workers of America (UMWA), who are now inspired by the long-term investments being made by Iron Senergy. “My grandfather and great-grandfather both retired as UMWA members. I grew up with great respect for the UMWA. A respect that is foundational in my current relationship with the Local 2300. Together, we will make Cumberland the best-in-class NAPP coal mine once again,” Thompson said.
This year, the Cumberland mine will produce more than 6 million tons of clean coal, a substantial improvement over the last couple of years. Next year, with continued improvement and additional room-and-pillar production, the mine could produce 6.5 million tons of clean coal.
Iron Senergy Emerges
What’s behind the Iron Senergy name? Thompson views the Pittsburgh No. 8 seam as instrumental in building the American iron and steel industry while fueling the industrial revolution. Senergy is a play on synergy and energy. “With all the assets that we acquired, we also picked up a number of “liabilities,” which I viewed as synergistic opportunities,” Thompson said. “These opportunities will serve as steppingstones as we achieve what we really want to be — which is a modern, diversified energy producer.”
During the acquisition discussion, Thompson brought Tim Runyan on as chief operating officer. Their paths crossed when they were both working for ArcelorMittal in 2018. Runyan was the COO at the time and Thompson handled sales and logistics for the company. “He and I hit it off really well,” Runyan recalled. A couple of years later, they parted ways when both left ArcelorMittal. In the summer of 2020, Thompson called Runyan with a wild idea and asked, “Hey, you want to take on a coal mine?” Runyan became Iron Senergy’s second employee with Thompson being the first.
Contura Energy had a different plan for these assets, which included closing the mine during December 2022. “I’m not saying their plan was right or wrong,” Thompson said. “That was their decision based on their outlook and their strategic goals. It worked out well for both parties. Although, we had a much different plan for Cumberland.”
Iron Senergy began to breathe new life into the operation, which really brought new light to the workforce and the surrounding community, Thompson explained. “This mine means more in terms of tax dollars to Greene County and Waynesburg than we had known before we got here,” Thompson said. “We recognized the importance of the mine and we also wanted to be a good neighbor and corporate citizen. We began to get involved with the community, the local hospitals, kids’ camps, schools, sports teams, etc. We also initiated and funded an ongoing market study for Greene County to help determine the immediate needs and opportunities in the area.
“When we arrived, there was a dark cloud hanging over the Cumberland mine,” Thompson said. “The situation was like someone knowing their last day on Earth. That day would always be on their mind and that’s what a lot of the workforce and the community had on their minds. It’s very rewarding that we were able to lift that cloud.”
Iron Senergy has had a positive influence on its 700-plus employees, but the impact is much greater when one considers families, dependents and the surrounding community. “That’s really rewarding,” Thompson said. This would be the “S” in the company’s ESG (Environmental, Social and Governance) profile.
At the time of the acquisition, the Cumberland mine was operating two development sections and a longwall. “Right out of the gate, we’re new to this operation and we’re trying to determine where we want to go with it,” Runyan said. “Contura had a short timeline remaining for it. We knew we needed to do a lot of things differently in a very short amount of time. We committed ourselves and brought a third continuous miner section online to increase development work.”
Looking forward, management realized that there was a sequence of events that had to happen to secure Cumberland’s future. “There was an ever-present risk that we wouldn’t be able to make it work, and that the money would have been sunk, but that has not been the case,” Runyan said. “We’ve earned this right to develop into what we have.”
A lot of structural changes have been made within the management group. There are some new faces and new ideas, Runyan explained. “We’re trying to tear down a lot of silos, which ultimately lets us streamline the decision-making process,” Runyan said. “We don’t have to go through 10 people to make a decision. The structure is simple and very flat at the top. If there is a decision to be made, we can make it on the spot, and that certainly ties into productivity improvements.”
Since taking over, Iron Senergy has seen a 37% improvement in productivity from its continuous miner sections and a 20% improvement in longwall productivity, compared to historical data they received from the previous owners. Runyan attributes the improvement in productivity to the people and an investment in equipment and technology. “We embraced the relationship with the UMWA and that has been rewarded,” Runyan said. “Thompson owns this business. It has no debt to service and no outside shareholders, but we do have stakeholders. Our employees are stakeholders and they have jumped onboard with us and created a really productive operation.”
Another key group of stakeholders are the customers of the Cumberland mine. As Thompson acknowledged, “without the support of our core customers, both historical and new, our vision at Iron Senergy would only be a vision.” Following the acquisition from Contura, Iron Senergy was a “known, unknown” to the industry and Cumberland’s historical customer base, Thompson explained. After many discussions, however, the majority of Cumberland’s core customers came to understand and embrace Iron Senergy’s vision and the continued presence of the well-known Cumberland operation in the marketplace. The beginning of 2021 was a proving ground with initial small spot sales serving as the building blocks for future term business. Throughout the second quarter of 2021, Cumberland’s core customer base, as well as new customers, began engaging in term discussions with the Iron Senergy team. These talks resulted in significant tonnage being booked through 2024 at strong pricing with both historical and new customers and plants, establishing a firm runway for the future of the Cumberland mine.
Considering the success Iron Senergy has experienced and the current favorable market conditions, the Cumberland mine has transitioned from a 5.5-day work week to a 7-day run schedule. Since the closing of the acquisition in December 2020, Iron Senergy has added more than 100 employees at the Cumberland mine, most of which are UMWA represented. At the beginning of 2022, the company plans to add a fourth continuous mining unit at the Cumberland mine.
The current district in which the Cumberland longwall operates contains three panels, Nos. 73, 74 and 75. All those panels are 11,000-ft long, and 1,340- to 1,380-ft wide. After panel No. 75, the mine will transition to a new district and panel No. 76 will be 15,000-ft long and 1,580-ft wide. It’s one year down the road, but panel No. 76 will be one of longest lengthwise in the U.S. and the longest widthwise.
During the summer, Iron Senergy moved to panel No. 74. “We started that panel up in mid-July and it will finish up somewhere around the March or April 2022 timeframe, and we will transition to panel No. 75,” Runyan said.
“The longwall move to panel No. 74 took place during the miner’s vacation,” Runyan said. “The timing was certainly a challenge. Justin and I were underground at the mine for 19 straight days, working with those guys, trying to help them and answering their questions. Afterward, we reviewed all the processes and talked about what worked and where we could improve. It led us to developing a plan for how we will handle moves in the future. Longwall moves are a lot of work, and we will take what we’ve learned and apply it to the next one.” When Cumberland transitions to panel No.75, Iron Senergy will install the Joy Landmark system, which would allow full automation.
Iron Senergy is currently rebuilding a Joy continuous miner, which they hope to get back mid-year 2022. “Right now, we’re considering the purchase of a new Joy continuous miner,” Runyan said. “We’re really trying to push on the technology front. Much different than most people in this business, we are very data-driven, trying to break everything down to the simple question of “What is a minute really worth to us and where are we losing production?” Whether it’s belts, equipment, operational delays, shift length, we break all that down and review it. We don’t just make decisions because they feel good. We trust the data.”
The Cumberland mine employs a surge bin underground that meters the coal between the mine and the prep plant. Raw coal from the longwall and the development sections pours on to a 72-in. mainline conveyor that dumps into the bin. The bin stores the coal and feeds it continuously on to a 51-in. slope belt. The Cumberland prep plant is assured a steady flow of raw coal.
Iron Senergy hasn’t made a lot of changes to the prep plant. “We perform routine maintenance, and the plant still runs well,” Runyan said. “It operates at its nameplate raw feed capacity of 1,600 tons per hour. We’re looking to debottleneck the delivery of clean coal to the train and then to the harbor. We’re looking at different options for storage, trying to remove any issues that might prevent us from getting coal to our customers.”
Transforming the Emerald Mine Site
The Emerald mine encountered some difficult mining conditions and was idled by the previous owner in 2016. The Emerald prep plant, coal silos and belting system, all of which are currently being demolished, were a big piece of the liability puzzle and another example of where Thompson thought they could turn a liability into an asset.
“There is a group on the property scrapping the old Emerald plant now,” Thompson said. “While they’re tearing it down, we’re also transforming that site into a new a frac sand transloading facility to service gas wells in the area.” Operations at the new facility were expected to begin in December 2021 and steadily ramp up to 1 million tons per year of frac sand.
The existing rail loop and upgraded sidetrack could also be used for any bulk materials that could arrive by rail. “To watch an idled coal mine evolve into something new that will once again offer full-time employment and contribute to the local economy is beyond rewarding,” Thompson added.
In addition, Iron Senergy has partnered with industry experts to pursue various renewable energy and innovation opportunities at Emerald, including utility scale and behind-the-meter solar power and pump-storage hydroelctric power, as well as CNG, hydrogen, coal-to-liquids and carbon credit technologies fueled by coal-bed methane naturally occurring in the Pittsburgh No. 8 coal seam and mine voids. Thompson has also indicated that he plans to evaluate projects to fill the existing impoundments at Emerald with material that is otherwise naturally disturbed in the area, creating a cost-saving opportunity for other industries and performing reclamation in a manner that reduces the collective environmental footprint.
With all of this activity, Iron Senergy has rebranded the former Emerald mine site as the “Greene Energy Center,” in a tribute to both the county and the type of innovative projects that are being pursued at the site. As Thompson noted, “all of these projects will create jobs, tax dollars and benefit the local economy, adding to Iron Senergy’s ESG profile as we position the company as a transformational, true energy player.”
“The sites are really cleaning up well,” Runyan said. “The Emerald plant used to be an eyesore for Waynesburg. People will no longer see this old steel structure that served as the backdrop for the town for so many years. Instead, they will see the Greene Energy Center and a source of new economic development and innovation in the community.”
New Tailings Storage Facility Extends Cumberland’s Mine Life
Cumberland was approaching the limit of its current tailings storage facility or refuse disposal area as its more commonly known in the coal business. “That was a big topic of conversation during the acquisition and maybe one of the ultimate reasons why Iron Senergy has this opportunity today,” Runyan said.
There was a plan to install new impoundment, which was CRDA No. 3 (coal refuse disposal area), but Iron Senergy wanted to take a different approach. It formed Task Force 22, a multidisciplinary team of Cumberland’s smartest people, including people from underground mining, surface operations and the plant. The group was assembled and tasked with a mission: Forget everything you’ve done. Forget everything you’ve looked at. Let’s go back to the drawing board and see what we can come up with, Runyan explained.
“Ultimately, that team really thought outside the box and came up with a feasible plan for CDRA No. 3,” Runyan said. “We also worked closely with PADEP and MSHA to develop new ideas, and both agencies have been extremely responsive and instrumental to our plans. We decided against the typical industry standard, a high-hazard dam, that’s essentially how it’s classified where you are impounding water.”
The new plan for CRDA No. 3 will be a dry-stack refuse facility that makes full use of the plate-and-frame press that the plant already has in place. “One of our goals is to demonstrate our commitment to our ESG profile, by being more environmentally and socially responsible,” Runyan said. “For the existing impoundment, we purchased several new replacement articulated trucks, D7 remote dozers, and tractors with pans (scrapers) to spread this material more effectively.”
The current facility has some capacity remaining. As the facility winds down, Iron Senergy will concurrently be constructing the CRDA 3 facility along with installing a 4,500-ft extension of its current overland conveyor system. They held a ground-breaking ceremony for the new facility on November 23, 2021, which included the management team as well as leaders from UMWA Local 2300. “This operation’s future depended on us making the commitment and investment to build this facility,” Runyan said. “We were glad to share that day with those guys.” CRDA No. 3 will extend the Cumberland mine’s life by 20 years.