Increasing cash flow from its Utica natural gas shale play, meanwhile, is providing the Lexington-based company additional liquidity to construct its Pennyrile underground steam coal mine in McLean County, also in Kentucky.
Pennyrile, also known as River Edge, is on target to produce coal by Q3 2014, outgoing CEO David Zatezalo told analysts early last month.
During the second quarter, Rhino sold 912,000 tons of coal, down from 1.1 million tons in Q2 2012. Earlier this year, Rhino signed a contract with a regional electric utility to supply 800,000 tons per year (tpy) from Pennyrile through 2017.
Zatezalo will be succeeded by Christopher Walton, the company’s former senior vice president and COO, in October; although he has announced plans to continue with the company in a reduced capacity.
Despite slackening demands for coal, Rhino nonetheless intends to increase production at the Rhino Eastern complex in West Virginia it co-owns with Patriot Coal Co., according to Zatezalo. “However, it’s questionable to me as to how far you want to take volume up,” he said.
Similar to other central Appalachian coal producers, Rhino is concerned about the future of the struggling coal basin because 2014 is “really in flux,” according to Zatezalo; he declined comment on Rhino’s anticipated central Appalachian sales for 2014. “I share your concerns,” he said. “I think every operator out there does.”