Alliance evaluates repair or shutdown of Pontiki coal complex

Alliance Resource Partners LP (NASDAQ: ARLP) said Oct. 2 that its Pontiki mining complex in Martin County, Ky., which has been idled since Aug. 29 due to U.S. Mine Safety and Health Administration action, remains closed.

MSHA ordered the closure of the prep plant and associated surface facilities at Pontiki due to the failure on Aug. 23 of a belt line between two clean coal stacking tubes. MSHA required a comprehensive structural inspection of all surface facilities by an independent bridge engineering firm before the surface facilities could be reopened.

On Sept. 18, the independent engineers issued their initial report, Alliance noted. Since receiving the report, mine personnel have been analyzing the findings and working to determine the expense and capital investment necessary to meet MSHA’s requirements to lift the closure order covering the surface facilities at Pontiki.

“ARLP will make every reasonable effort to keep the mine open so that Pontiki can continue safely producing coal and providing quality jobs to our hardworking employees,” said Joseph Craft III, company President and CEO. “We are working diligently with all parties with a vested interest in Pontiki’s future and expect to complete our evaluations within the next two weeks.”

As a result of idling Pontiki, ARLP is evaluating the potential impact to its 2012 third quarter financial results including a possible one-time, non-cash charge to reflect an impairment of part or all of the approximately $34m of assets related to the complex. As part of this evaluation, ARLP is developing contingency plans to indefinitely suspend operations at the mine and deploy its equipment to other ARLP operations so that capital savings will mitigate the potential loss of future operating cash flow. Regardless of the decision to resume or indefinitely suspend production at Pontiki, ARLP currently anticipates the impact to future distributable cash flow will be negligible.

The Pontiki complex is owned by Pontiki Coal LLC and operated by Excel Mining LLC, both wholly-owned subsidiaries of ARLP. Prior to the suspension of operations, Pontiki employed about 197 workers and generated 2012 year-to-date coal sales and production volumes of around 517,000 tons and 558,000 tons, respectively.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.