The Alpha Coal West Inc. unit of Alpha Natural Resources (NYSE: ANR) is looking to explore 3,495 acres of coal reserves next to its existing Belle Ayr mine in the Wyoming end of the Powder River Basin.
The U.S. Bureau of Land Management said in a May 10 Federal Register notice that it is looking for parties willing to share exploration expenses – and exploration results – with Alpha Coal West on this tract in Campbell County. Such invitations are required by federal regulations and rarely taken up, though the mines in the Wyoming PRB are seeing increased competitive activity lately on the federal leasing front. That is because the mines, located on a north-south axis along a line where the coal outcrops to the surface then gradually gets deeper as you move west, are now competing with each other for reserves in between them. The incentive is to compete with each other for the shallower-cover reserves to the east, between the existing mines, avoiding for as long as possible the need to move west into deeper cover and higher mining costs.
Belle Ayr is bounded on the north by the Caballo mine of Peabody Energy (NYSE: BTU), and on the south by the Cordero Rojo mine of Cloud Peak Energy (NYSE: CLD). A BLM map indicates that the area Alpha wants to explore is west of the Belle Ayr mine, shading to the northwest, making Peabody the more likely interested party in this tract.
“Alpha Coal West, Inc. has applied to the BLM for a coal exploration license on public land adjacent to its Belle Ayr Coal Mine,” said the BLM notice. “The purpose of the exploration program is to obtain structural and quality information of the coal.”
“Belle Ayr consists of one mine that produces sub-bituminous, low sulfur steam coal for sale primarily to utility companies,” said Alpha’s Feb. 29 Form 10-K annual report. “Belle Ayr extracts coal from a coal seam that is 75 feet thick. The mine sells 100% raw coal mined and no washing is necessary. Belle Ayr shipped 24.5 million tons of coal in 2011. Belle Ayr has the advantage of shipping its coal on both of the major western railroads, the BNSF Railway and the Union Pacific Railroad, to power plants located throughout the West, Midwest and the South.”
U.S. Mine Safety and Health Administration data shows that Belle Ayr produced 6.1 million tons in the first quarter of this year and 24.6 million tons in all of 2011.