“We’ll be scratching coal in May for shipments in July,” Zatezalo added.
Income dipped for Rhino during the July-September period to $2.9 million from $8.9 million a year earlier. Coal revenues fell sharply to $59.6 million from $83.9 million in the third quarter of 2012. Rhino’s quarterly production also dropped to 946,000 tons, well below the 1.2 million mark in the year-ago time frame. Rhino sold 928,000 tons of coal in Q3, down from 1.3 million tons a year ago.
Chris Walton, Rhino’s new president and CEO, said the company continues to make good progress in developing the new Eagle No. 3 metallurgical underground coal mine in Wyoming County, W.Va. Eagle 3, which began production in the third quarter of 2012, essentially replaces the Eagle No.1 deep mine in neighboring Raleigh County, W.Va., which will run out of recoverable reserves by the end of 2013.
At full capacity, Eagle 3 will be able to produce about 490,000 tons a year. The Eagle mines are part of the Rhino Eastern joint venture between Rhino and Patriot Coal. Rick Boone, Rhino’s chief financial officer, said revenues “continue to be impacted by the weak coal market. We continue to see a significant decrease in the price of met coal from our central Appalachian operations from the prior year.” That decrease was offset somewhat, however, by “favorable prices” at the company’s northern Appalachian and Rhino Western operations.
According to Zatezalo, 2014 tons from Rhino’s Hopedale underground mine in Harrison County, Ohio, are fully committed, as is next year’s projected output from the Castle Valley deep mine in Emery County, Utah.
Rhino is pinning much of its hopes for higher coal-related revenues and production on Pennyrile, strategically located on the Green River to offer the potential for overseas exports. Earlier this year, Rhino signed an agreement with an unidentified regional electric utility to supply 800,000 tons annually from the mine through 2017, with a contract reopener for 2018-2019. The company is pursuing additional sales for Pennyrile, which will draw upon a large contiguous, fully permitted proven reserve of 32.5 million tons.
During Q3, year-over-year coal revenues per ton increased $4.92 to $60.14 for Rhino’s northern Appalachia operations, while costs per ton rose $4.21 to $43.88. In central Appalachia, coal revenues averaged $82.05 a ton, versus $89.78 a ton in the prior year. Met coal revenues were $82.21 per ton compared to $113.23 a ton a year ago. Rhino Western’s coal revenues per ton increased to $40.17 in the latest quarter, up from $35.15 a ton in the previous year.
For the first nine months of 2013, Rhino sold 2.8 million tons of coal, down from 3.5 million tons in the first three quarters of 2012. Total coal revenues were $184 million in the first three quarters this year, compared to $225.7 million during the year-ago period.
Rhino’s coal revenues per ton were $64.63 in the first three quarters this year, versus $64.70 for the first nine months of 2012, a decrease of 0.1%. Cost of operations per ton were $55.13 in the first nine months of this year, compared to $53.51 for the first nine months of last year, an increase of 3%.