Joseph Craft III, president and CEO of the Tulsa, Okla.-based company, estimated the project’s capital cost at $200 million to $210 million. The Environmental Protection Agency issued a final permit for the mine in May. Gibson South, like its nearby counterpart, Gibson North, will use four continuous miner units employing room-and-pillar mining techniques to access approximately 48.4 million tons of medium-sulfur coal reserves from the Indiana No. 5 seam. Gibson South is expected to produce about 3.3 million tons a year after it begins production in the third quarter of 2014.
“Once completed, the Gibson South mine combined with the Gibson North mine will give ALRP more than 6 million tons of annual production of a less than 3-lb SO2 product, which today commands over a $15 per ton premium in the domestic market compared to the typical 5-lb product sold from the Illinois Basin,” Craft said.
Gibson South will be operated by Gibson County Coal, an Alliance subsidiary. Gibson County Coal also operates Gibson North. About half of the combined production from the Gibson mines is committed, Craft said, and the company remains in advanced discussions with customers.
In the second quarter, Alliance earned $98.1 million, thanks to record sales of 7.9 million tons, an increase of 5.4% over the year-ago period. The company realized higher quarterly coal prices in all of its operating regions, in particular Northern Appalachia.
Craft, speaking to analysts during a conference call to discuss earnings, said Alliance “remains on track to post its 11th consecutive year of record financial performance in 2011 after once again delivering record second-quarter and first-half results.”
During the three months ended June 30, Alliance entered into new coal sales agreements for deliveries of 4.2 million tons through 2016 at prices “above current price realizations,” he said, bringing the company’s total new contract commitments to approximately 9.7 million tons since the beginning of 2011.
In particular, demand for Alliance’s scrubber-quality coal from the Illinois Basin and Northern Appalachia “continues to show growth as the markets for these products expand both domestically and internationally. We remain optimistic our strategy of focusing on these expanding markets bodes well for ALRP’s future growth prospects.”
Based on half-year results and current estimates, the company anticipates 2011 production within its previous projections of 31.6 to 32.6 million tons. Alliance continues to expect 2011 coal sales in a range of 32 million to 33 million tons, substantially all of which is committed and priced.