Mechel shuts some W.Va. mines due to oversupply of raw coal

Russia-based Mechel OAO (NYSE: MTL) reported Oct. 22 that it has temporarily halted most of the mining facilities of Mechel Bluestone in southern West Virginia, which are part of its mining division.

Due to accumulated inventories of coal, Mechel decided to temporarily suspend mining at some facilities of Mechel Bluestone’s mining complexes, which are Keystone, Justice Energy and Dynamic Energy. The Frontier mine in Wyoming County, which is part of Dynamic Energy, as well as the K-2, Red Fox and Coal Mountain wash plants, will continue operating.

“Taking into account current contracts, as well as inventories of 650,000 tonnes of raw coal and 345,000 tonnes of finished product, operations at the suspended facilities are expected to resume in two to three months,” Mechel noted. “All obligations under pre-existing contracts will be met.”

The Bluestone mining business sold 3.4 million tonnes of coking and steam coal in 2011, 71% of which was sold to the export market, said Mechel in an annual Form 20-F report filed May 10 at the SEC. The Bluestone operations produced 4.9 million tonnes of run-of-mine (raw) coking coal in 2011, up from 4.1 million tonnes in 2010. Bluestone produced 0.5 million tonnes of run-of-mine steam coal in 2011, down from 0.7 million tonnes in 2010.

Substantially all of the Bluestone coal was sold on the spot market. A major portion of production is shipped via the Norfolk Southern railroad. These shipments either go directly to coking plants in North America or to port facilities for transloading into ships. In 2011, Bluestone exports went through the port of Norfolk, Va., and the port of New Orleans, La.

The Bluestone mines, bought in May 2009 from coal operator Jim Justice II, are located in McDowell and Wyoming counties in southern West Virginia, near Beckley. The mines are organized around three mining complexes: Keystone No. 1 and No. 2 (collectively called Keystone), Justice Energy and Dynamic Energy, all of which are located in close proximity to each other.

  • The mines in the Keystone complex produce premium low-vol coking coal. The complex includes two active surface mines and three active deep mines. Coal is hauled by truck directly to the complex’s prep plant for washing and is then sent to its rail loadout, which is served by the Norfolk Southern. The Job 32 strip operation has a mine life extending to only this year, with the Job 39 strip job having a life to 2030. The Mine 58 deep mine has a mine life to 2016, the Mine 65 deep operation has a life to 2014 and the Spider Ridge deep mine life extends to 2013.
  • The mines in the Justice Energy complex produce mid-vol coking coal. The complex includes one active surface mine, Job 38, which has a mine life to this year. Coal from the mine is hauled by truck directly to the complex’s prep plant (which is leased from Natural Resource Partners) for washing and is then dispatched to its rail loadout facility, which is served by the Norfolk Southern.
  • The mines in the Dynamic Energy complex produce high-vol coking coal. The complex includes an active surface mine and an active deep mine, the May 10 report said. The Job 30 strip operation has a life to 2015 and the Ben’s Creek 1 deep operation has a life to 2014. Coal from the mines is hauled by truck directly to the complex’s prep plant (which is leased from Natural Resource Partners) for washing and then moves to the NS-served loadout.
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.