SunCoke, which has been examining opportunities to sell all or part of its coal business for the last several months, said December 15 that it will continue to engage in those discussions and that weak prices were to blame for the move.
“While we plan to continue pursuing opportunities to sell all or a portion of our coal mining business, the challenging coal price environment has led us to make these hard decisions,” Chairman and Chief Executive Officer Fritz Henderson said. “I’ve been very impressed by and thankful for the leadership and commitment of our coal team, which has consistently achieved high levels of productivity, safety and regulatory compliance during this difficult time. However, idling a significant portion of the coal mining business is the right step going forward and allows us to focus on our core competencies of processing and handling raw materials for industrial customers.”
Effective immediately, the producer said it will reduce coal production from 1.1 million tons annually to about 500,000 tons of mid-vol coal per year and cut preparation plant operations by half. Additionally, 175 positions will be eliminated from the SunCoke payroll. It did not indicate where the cuts would be made or the types of losses to be felt on the personnel front.
For the short-term future, it said, it will continue at a 500,000-metric-ton-per-year level as it continues to pursue a coal assets sale; officials said that another alternative to the sale option might be to retain a contractor firm to mine on its behalf, or potentially to purchase all of its coal requirements to supply the Jewell Coke facility.
“While we expect our downsizing plan to significantly reduce the ongoing cost to supply coal to our Jewell Coke operations, in light of current coal market conditions, we will continue to incur costs whether we mine the mid-vol portion of Jewell Coke’s coal supply requirements or purchase all coal from third-parties,” SunCoke officials noted, adding that if it is ultimately unsuccessful in selling its coal mining business while mining economics continue to degrade, the company may decide to idle the remaining mines, demolish the preparation plant and purchase all Jewell Coke coal requirements from third-parties.
It has projected that the impact to Jewell Coke by purchasing 100% third-party coal to be about $20 million per year due to transport and material handling costs.
SunCoke also expects to incur one-time cash costs of $25 million to $35 million related to its downsizing plans.
The company, which has more than 110 million tons of proven and probable coal reserves, has active coal operations in Virginia and West Virginia; its cokemaking facilities are located in Virginia, Indiana, Ohio and Illinois, as well as Vitoria, Brazil and Odisha, India.