For the past year or so, Paringa had planned to first develop the Buck Creek No. 1 deep coal mine to produce high-sulfur coal from western Kentucky’s predominant No. 9 seam. But Buck Creek 1’s projected development costs are about $105 million, considerably more than the $44.4 million Paringa estimates it will take to get Buck Creek No. 2 up and running by the second quarter of 2018.
Because the coal at Buck Creek No. 2 also is much shallower — about 280 feet deep compared to 660 ft for Buck Creek 1 — Buck Creek 2 can be developed as a box-cut, room-and-pillar operation much more quickly than No. 1, according to Nathan Ainsworth, who is in charge of business development for Paringa.
“Access to the coal is much better at the Buck Creek No. 2 location” in McLean and Hopkins counties, he said. “We always knew the coal was shallow. What changed our view was the permitting process. When we looked at No. 2, our thought was it would take two to three years to push through a new mine. (But), given the lack of mine developments in eastern Kentucky, there is not such a backlog anymore.”
A scoping study completed in early February for the No. 2 mine caused Paringa to flip-flop the order of its mine development plans. The study found that No. 2 is expected to achieve average earnings before interest, taxes, depreciation and amortization [EBITDA] of $33 million annually with average annual total operating costs of $32.94/ton.
Paringa also has determined it will not require a Section 404 Clean Water Act permit from the federal Army Corps of Engineers for No. 2.
Indeed, current plans call securing surface property for No. 2 by this summer, with permitting likely to consume the remainder of the year. Mine construction should get under way in the latter part of 2017, with initial production in the second quarter of 2018.
Paringa said Buck Creek No. 2’s coal is high quality, with average washed qualities of 12,121 Btu/lb, 2.8% sulfur, 8.9% ash and a relatively low 0.14% chlorine. The chlorine level, the company said, should give the mine a clear advantage over many oth