Ramaco looks to open two coal mines by 2017

September 6, 2016

An exclusive report from The Associate Press published on Sept. 6 tells the story of one coal mining company bucking the recent trend of mine closers to instead invest in the start up of two mines.

According the AP, Kentucky-based Ramaco's partnership along with two private equity firms, are planning a $90 million investment on two new metallurgical coal mines and related facilities in West Virginia and Virginia next year. The mines could create as many as 400 jobs Ramaco CEO Randall Atkins said.

The Elk Creek Mine in southern West Virginia and the Berwind Mine spanning the boundary between southern West Virginia and Virginia will be operational for around 17 years. Test mining at both sites should begin by early next year and work on the Elk Creek Mine's coal preparation plant will start even sooner, according to Ramaco.

"We will start construction at the Elk Creek property just as soon as we get all the equipment lined up there," Atkins said.

The company plans to begin talking with potential buyers in the next few weeks and could begin shipping coal under supply agreements in 2018, he said.

Ramaco also has been seeking to open a mine in northern Wyoming that would supply coal to power plants for generating electricity. The Brook Mine proposal has been challenged in court by another company claiming surface ownership rights in the area but the mine faces no significant regulatory obstacles yet.

All of this fly counter to what has been happening in the global coal sector for the past year in which the industries major companies, including Alpha Natural Resources, Arch Coal and Peabody Energy, have turned to bankruptcy reorganizations.

Some of the coal companies in Chapter 11 mine much of the nation's metallurgical coal, but they have been burdened by heavy debts. Ramaco is debt-free and will strive to keep costs down, Atkins said.

"If we can control costs, the market will take care of itself. So even when you had a very low point in the market — which frankly we've had in the past 12 months — our cost is such that we would still be quite profitable," Atkins said.

Very thick coal seams will help control costs at the mines, which will be mostly underground but will include some surface and longwall operations as well, he added.

Ramaco has been working on development, planning and permitting at Elk Creek since acquiring the property in 2012. The company acquired the Burwind property in 2015, Atkins said.

Long-term, Ramaco seeks to produce up to 4 Mt (4.4 million st) from the two mines per year.

Prices for high-quality U.S. metallurgical coal have fallen in recent years, from $300/t ($275/st) to below $100/t ($90/st), but recently rebounded to around $140/t ($127/st) amid production cuts in China, rising demand in India and supply interruptions in Australia, said James Stevenson, director of North American coal for analyst firm IHS.

A metallurgical coal mine in Alabama formerly owned by bankrupt Walter Energy is set to reopen under new owner Warrior Met Coal, he pointed out.

New life for metallurgical coal mining could become a trend if companies can lock in contracts at higher prices, he said.



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