“We expect our 2012 met coal production will be sold at prices equal to or higher than 2011 levels,” Dave Zatezalo, president and CEO of the Lexington, Ky.-based company, said during a third-quarter earnings call with analysts in November. The company entered into long-term sales contracts for substantially all of its projected steam coal production at both its Hopedale and Castle Valley underground mines in Ohio and Utah, respectively.
Rhino’s earnings fell in the three months ended September 30 to $9.8 million from $21.8 million a year earlier, although total revenues climbed to $93.5 million compared with $85.2 million in the third quarter of 2010. Quarterly coal sales were flat at 1.2 million tons. The company went public in the United States last year.
Excluding results from Rhino Eastern, a joint venture between Rhino and Patriot Coal in Raleigh and Wyoming counties in West Virginia, Rhino’s third quarter met production in Central Appalachia was less than in the second quarter, primarily because of the exiting of the contract miner at Grapevine. Rather than re-engaging a contractor, the company purchased the new highwall miner. Grapevine is expected to produce about 240,000 tons a year.
Although Rhino Eastern’s third quarter results were similar to the second quarter, Zatezalo said he was “very encouraged that this operation is on track to improve safety, increase production and lower costs. We have made many changes at Rhino Eastern and I believe we have the right people and equipment in place to make the operation a long-term success.”
Work also began on the Remining 3 surface mine at Tug River in the latest quarter, with the mine expected to be in operation before the end of the year. Remining 3 is projected to have a run rate of 375,000 tons annually.
The Access Energy underground mine in Rhino’s Deane complex in eastern Kentucky began production in the third quarter with a projected run rate of 240,000 tons annually of high quality steam coal. Rhino said Access’ production will replace production from depleted mines and provide a corridor to an estimated 20 million-ton expansion reserve that management believes will produce a pulverized coal injection product starting in late 2013.
In Northern Appalachia, Rhino purchased non-reserve coal deposits estimated to include about 2.5 million tons at its Sands Hill surface operation in Ohio in the third quarter for approximately $2.5 million. The company says it has no plans to boost Sands Hill’s production until prices improve.