Buck Creek No. 1, to be located along the Hopkins County/McLean County border, will be one of the largest mines developed in the high-sulfur Illinois Basin (ILB) region in several years. The mine should produce around 4 million tons of coal annually, according to Nathan Ainsworth, Paringa’s vice president of business development.
Because the construction is scheduled to take about 18 months, production is not likely to be begin until sometime in 2018.
Paringa is targeting the domestic electric utility market, in particular, controlled base-load power plants located along the Ohio River or its tributaries. Those plants received more than 50 million tons of coal in 2013, and the company is optimistic it can grab a piece of that market.
Indeed, Ainsworth said in August it is likely that Paringa will be able to announce a long-term coal supply agreement before the end of 2015. He declined to identify the utilities with whom Paringa is negotiating.
Even though several suppliers have reduced production in the ILB this year and some coal-burning generating units are set to retire over the next few years, Ainsworth said utility coal buyers are eager to maintain multiple coal sourcing options so pricing can remain competitive.
One utility coal buyer in the region, who asked not to be identified, confirmed such a purchasing strategy. While the combination of Murray Energy/Foresight Energy, Alliance Resource Partners, Peabody Energy and a few others dominate the region, it is important to keep smaller producers in the mix as well, he said.
Paringa believes Buck Creek 1 can compete on price. Study results released early this year indicated that multiple underground mines the company is proposing for western Kentucky would have average operating costs of $30.19/ton. When Buck Creek No. 1 begins production, the mine’s coal is expected to receive a price of $47.36/ton, increasing to more than $63/ton in 2030. Buck Creek No. 1 has a projected life of 18 years.
Buck Creek No. 1’s fully washed coal is expected to have average specifications of about 11,800 Btu/lb and 5-lb/mm Btu sulfur.
Meanwhile, planning is under way by Paringa for a second Buck Creek mine that could be in production a few years down the road.