The Oaktown Nos. 1 and 2 mines in Knox County are producing high-sulfur coal “in the mid-$20s” per ton, Bilsland told analysts during a May 12 conference. Hallador recorded net income of $7.6 million in the January-March period, up from $3.5 million a year ago.
Sunrise’s coal sales more than doubled to 2.1 million tons in the first quarter of 2015 at an average price of $45.23/ton, thanks in large part to the Oaktown additions. The two continuous miner operations, located near U.S. 41 just east of the small community of Oaktown, were purchased from Evansville, Indiana-based Vectren Fuels for $296 million.
In 2014, Sunrise sold 776,000 tons in the first quarter at an average price of $42.55/ton.
Bilsland said the Oaktown complex has been so successful in turning out coal for less money that the company has decided to “shrink” Sunrise’s flagship Carlisle underground mine in Sullivan County, Indiana, which has struggled to get its costs below $30/ton.
“Our biggest cost issue is getting our arms around Carlisle,” which consistently produced about 3 million tons of steam coal annually for the past several years before Sunrise acquired Oaktown, he said. Now, though, “we have to change our focus to less about production and more about cost” at Carlisle.
Bilsland said Sunrise has “roughly 18 miles of beltline at Carlisle. We hope to idle about nine miles of beltline, which we think will have a dramatic effect on bringing our cost down. We want to finish mining out in the areas that we’re in, but you’ll see that happen late in the second quarter and early in the third quarter. In the past, we have focused on getting a lot of production out of Carlisle, which caused us to mine in three different directions. Now, we’ll try to concentrate that production to one area to lower costs.”
He added, “We have excess capacity at Oaktown, so we don’t have to run bigger tonnage at Carlisle.”
Sunrise has five continuous miner units at Carlisle, but currently is running just four. “In almost all of our contracts, we’re allowed to source coal from either Carlisle or Oaktown,” Bilsland noted. “If we back Carlisle down, it’s because we’re ramping up Oaktown.”
Although Sunrise has operated the Oaktown mines for only about eight months, the company has been pleasantly surprised with their cost structure. “We’re really thrilled with what Oaktown has been able to accomplish,” Bilsland said. “The numbers there have surprised us to the good side. Our management team there tells us they have further cost reductions and further improvements coming.”
Soon after the Vectren deal, Sunrise closed the Prosperity underground steam coal mine near Petersburg in Pike County, Indiana. According to Bilsland, some of Prosperity’s equipment has been moved to Oaktown in preparation for a ramp-up.
“We have a lot of capacity, and we think we can grow really up in the 12-million-ton range [annually] by just changing out,” Bilsland said. “We have a lot of growth potential. The trick for us is going to be market.”
