Brian Cantrell, Alliance senior vice president and CFO, told the Raymond James Coal Investors Conference in New York in June that Gibson’s mid-sulfur coal reserves are attracting attention from export customers.
“This is a very attractive product, a mid-sulfur product that travels well,” Cantrell said. “It’s on target to bring initial production into the marketplace in the third quarter of 2014.” Once in peak operation, Gibson South is targeted to produce about 3.3 million tons of coal annually, drawing from “a nice, long reserve base.”
While Alliance is starting to see overseas interest in Gibson’s thermal product, Cantrell said the company’s River View underground mine about 50 miles away along the Ohio River in Union County, Ky., also presents opportunities for export. After producing its first load of high-sulfur coal August 17, 2009, River View has enjoyed a steady surge in output. The mine produced nearly 7.6 million tons of coal in 2011 and 2.3 million tons in the first quarter of 2012.
On May 16, Alliance started longwall production at its newest mine, Tunnel Ridge in Ohio County, W.Va., and Washington County, Pa. The mine is expected to produce about 2.8 million tons this year, ramping up to a full run rate of 6.5 million to 6.8 million tons by 2014.
Alliance traditionally has developed its own mine projects. With White Oak Resources’ No. 1 mine near McLeansboro in Hamilton County, Ill., it is pursuing a different strategy. Cantrell said the White Oak transaction “is a little bit of a step-out from what we’ve done in the past.” Alliance essentially is investing in the operation and will not actually operate the longwall mine when it begins production in a couple of years. The No. 1 mine is expected to produce about 6 million tons of high-sulfur coal annually.
“We have three different streams of cash flow” with White Oak, Cantrell said. “We own the reserves, own the surface facilities, and are building the prep plant and we’ll receive a throughput stream from the coal. And, we put an equity investment into White Oak Resources and we receive preferred distributions.”
After producing 31 million tons of coal in 2011, Alliance is poised for significant growth, with production projected to rise to 50 million tons in 2016.