The Lexington, Kentucky-based company said it also executed a second met coal export order for 70,000 tons that is to be delivered from August through January 2017 from its Tug Fork operations in eastern Kentucky and West Virginia. In both sales, the customers were not identified.
The two orders, Rhino said in a second-quarter earnings report, “will greatly reduce the holding costs incurred on the idled operations in Central Appalachia over the balance of 2016.”
Continued productivity improvements at Rhino’s Pennyrile underground high-sulfur steam coal mine in western Kentucky have lowered costs and improved coal recovery rates at the three-year-old mine compared to 2015, the company said.
Rhino is fully contracted for 2016 at the Illinois Basin mine with 1.2 million tons to be produced and sold this year to a pair of Kentucky electric utilities, Louisville Gas & Electric Co. and Big Rivers Electric Corp. Pennyrile is capable of producing about 2 million tons annually.
In Northern Appalachia, Rhino said electric utility customers took delivery during the April-June period of additional shipments of steam coal from its Hopedale underground mine in Ohio than in the first quarter of 2016 “as these customers fulfill their contracted tons that were carried over from the prior year.”
The company said it continued to seek sales contracts for the undisclosed remainder of Hopedale’s open sales position in2016. Meanwhile, Rhino said its Sands Hill steam coal surface mine in Ohio “continued to produce positive results” in the second quarter.
At its Rhino Western operation in Emery County, Utah, meanwhile, Rhino said its Castle Valley operation “performed well during the quarter providing positive cash flow, which we expect to continue for the remainder of the year.”
Overall, Rhino produced and sold 850,000 and 798,000 tons, respectively, in the second quarter, representing 15.1% and 18.5% declines, respectively, from the second quarter of 2015.
Coal revenues totaled $39.1 million in the second quarter, versus $48.5 million a year earlier, a 19.3% decrease. The company said that was due to fewer steam coal tons sold in Central Appalachia, partially offset by higher sales from Pennyrile.
Rhino recorded a net loss of $121.9 million in the second quarter, largely because it took an asset impairment charge of approximately $118.7 million for the quarter and first six months of the year on its Elk Horn coal leasing company in eastern Kentucky.
In late August, Rhino announced Elk Horn’s sale to an unidentified third party for $12.5 million in cash. Joe Funk, Rhino’s CEO, said proceeds from the sale would be used to “continue to reduce our debt and provide us additional financial flexibility for our future coal operations.”
While Elk Horn had been a positive cash flow contributor for Rhino since its acquisition in 2011, “the ongoing weakness in the Central Appalachia steam coal markets has adversely impacted Elk Horn and its lessees,” he added. As a result, Rhino’s management determined “the best value for our unitholders at this time was to monetize this asset.”
