Permitting in hand, Xinergy to start construction on new W.Va. prep plant

Xinergy Ltd. (TSX:XRG) said Oct. 16 that wholly-owned subsidiary South Fork Coal Co. LLC received needed approvals to begin construction of its preparation plant and rail loading facility at its mid-volatility metallurgical coal project in Greenbrier County, W.Va.

The company will begin site preparation work immediately and plans to commence construction during the 2012 fourth quarter. Construction of the prep plant and rail loading facility is expected to take six to nine months at a capital cost of about $20m. Consistent with prior guidance, the company expects to produce 300,000 to 400,000 tons of premium-quality, Sewell-seam mid-vol met coal in 2013, reflecting a rate of around 50,000 tons per month following completion of the prep plant and rail load-out. Xinergy said it continues to anticipate cash costs of about $100/ton once this production rate is achieved, and believes South Fork will have capacity of about 80,000 tons per month.

Xinergy CEO Matt Goldfarb said: “Today marks a significant milestone for our Company, reflecting the perseverance and commitment of our entire West Virginia team. Bernie Mason, our President, and our engineering and permitting group in West Virginia have done an admirable job in the face of an extremely challenging regulatory environment in advancing our South Fork mid-vol project to position the Company for a long-awaited step-change in our production profile. Despite near-term weakness in metallurgical coal pricing, the Company remains bullish on the long-term fundamentals for the global steel industry and, in particular, believes that its ultra-premium South Fork mid-vol met reserves will preserve a niche market position for Xinergy through the cycle.”

Said an Aug. 13 financial report from Xinergy on this operation: “In January 2011, we acquired 14,000 acres of coal mineral leases in Greenbrier County, West Virginia through our wholly owned subsidiary, South Fork Coal Company, LLC (‘South Fork’). The acquisition included permits that were recently transferred to the Company by the West Virginia Department of Environmental Protection for the surface mine we refer to as Lost Flats. We received all necessary final approvals and permits in the fourth quarter of 2011 for Lost Flats and began development work in December 2011. The Lost Flats mine is a high quality, mid-volatility metallurgical surface mine in the Sewell coal bed that began limited production in April 2012. We also leased approximately 21,000 additional acres adjacent to this property in January 2012 that is expected to increase our reserve base at these properties. In August 2012, the Company received the necessary permits for a second surface mine we refer to as Blue Knob.”

Xinergy began selling coal in April from the Lost Flats mine. The Blue Knob permit was issued on Aug. 2 and covers 852 acres, with mining to take place in the Sewell, Sewell A and Sewell B coal seams.

Headquartered in Knoxville, Tenn., Xinergy Ltd., through its wholly owned subsidiary Xinergy Corp. and its subsidiaries, is engaged in coal mining in eastern Kentucky, West Virginia and Virginia.

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.