Co-owned by two Ohio companies, FirstEnergy Corp. and Boich Companies, and Switzerland-based international commodity trader Gunvor Group, the mine’s latest woes arrived unexpectedly December 1 when the Mine Safety and Health Administration ordered it to close after CO concentrations exceeding 300 parts per million were detected in a mined-out area about 1.7 miles from the working face. CO levels above 125 ppm must be reported to the federal agency.
For the next couple of weeks, Signal Peak Energy, the mine operator, pumped nitrogen into a portion of the mine to lower the gas to acceptable levels. The mine finally received MSHA’s blessing to reopen in late December.
But the idling was potentially costly for the mine located near Roundup in Musselshell County and formerly known as Bull Mountain. Not only did it lose about three weeks’ worth of production, the company was forced to declare force majeure during the shutdown, according to mine spokesman Mike Dawson. In a December 30 interview, Dawson said he did not know if the force majeure had been lifted.
In several ways, 2011 was a noteworthy year for Signal Peak, a producer of high-quality bituminous coal. It began with the operator looking to step up production in excess of the 3.5 million tons extracted in 2010. Eventually, the mine’s annual output is targeted at about 12.5 million tons.
But roof falls in August temporarily sidelined the mine. Then, in October, FirstEnergy and Boich, which jointly purchased the mine three years ago, sold a one-third share to Gunvor’s Pinesdale LLC subsidiary for $400 million. FirstEnergy got $260 million and Boich $140 million in proceeds from the transaction.
As part of the deal, FirstEnergy, which owns several electric utilities in Ohio, Pennsylvania and New Jersey, reduced an original coal purchase agreement with the mine from 7.5 million tons annually to no more than 2.5 million tons a year.
Gunvor and its new partners, meanwhile, began pursuing a strategy of selling large volumes of Signal Peak’s coal overseas, in particular to markets in South America and Asia.
Then in November, the U.S. Bureau of Land Management rejected as insufficient a $5.3 million offer from Signal Peak, the only bid the agency received, at a federal coal lease sale. The five unleased coal tracts in Musselshell County contain an estimated 35.5 million tons of publicly owned coal.
BLM plans to hold another lease sale sometime in 2012—no date has yet been set—and Dawson confirmed Signal Peak plans to submit another bid.