For several years, Sunrise’s principal operation has been the Carlisle mine in Sullivan County, Indiana. The mine consistently has produced about 3 million tons of high-sulfur coal annually for sale to several scrubbed baseload power plants. The Vectren transaction that closed in late August added the Oaktown Nos. 1 and 2 mines in Knox County and the Prosperity underground mine in Pike County, Indiana, the latter of which has been temporarily idled because of persistent geological problems.
Hallador said in a November filing with the federal Securities and Exchange Commission (SEC) it has combined 21 million tons from Oaktown 2 with 43 million tons from the War Eagle reserve in Lawrence County to create a 64-million-ton reserve that will be mined through the Oaktown 2 portal.
Because Oaktown 2 is contiguous to Carlisle and the War Eagle reserve, “we intend to mine part of Oaktown 2’s reserve from our Carlisle portal and all of our War Eagle reserve from the Oaktown 2 portal,” Hallador added. “Oaktown 1, Oaktown 2, Carlisle and War Eagle are now one large underground mining complex representing 142 million tons of controlled reserves, with three portals, two wash plants and two rail facilities,” located on the CSX railroad.
Sunrise also has leased approximately 19,300 acres in Vermillion County, Illinois, near the village of Alberton, for the proposed Bulldog underground mine. The mine will produce about 3 million tons of thermal coal annually from a current reserve base of about 35.8 million tons.
In July, the company was notified by the Illinois Department of Natural Resources its Bulldog mine permit application had been deemed complete, starting the timeline for the agency’s public review process. Sunrise hopes to be awarded a final permit no later than mid-March 2015.
Thanks in part to the Vectren acquisition, Sunrise sold 3.1 million tons of coal in the first nine months of 2014 at an average price of $42.88/ton. That compares with the 2.4 million tons it sold in the same period of 2013 at an average price of $42.42/ton.
Sunrise already has committed sales of nearly 9.5 million tons at an average price of $44.32/ton for 2015 and 3.3 million tons at an average price of $44.03/ton in 2016. So far, it has sold 1.45 million tons at an average price of $44.39/ton for 2017.
Major customers include Duke Energy Corp.; Hoosier Energy, an electric cooperative in Bloomington, Indiana; Indianapolis Power & Light Co., an AES Corp. subsidiary; and Northern Indiana Public Service Co., a subsidiary of NiSource Inc. Sunrise also delivers coal to three unidentified Florida utilities.
Hallador told the SEC it anticipates increasing demand for high-sulfur Illinois Basin (IB) coal, noting IB coal is expected to grow at a rate faster than overall U.S. coal demand because it has a higher heating content than Powder River Basin (PRB) coal and lower cost structure than Central Appalachian (CAPP) coal.
“Many utilities are scrubbing to meet emission requirements beyond just sulfur compliance,” the company said, “even utilities that burn exclusively PRB. Once scrubbed, those utilities are usually capable of burning IB coal. It is this trend of new scrubber installations coupled with rising CAPP cost structure that is leading to increased switching from CAPP coal to IB coal. Some fuel switching will also occur from PRB to IB in newly scrubbed utilities located near IB coal supply.”
