Alliance predicts big production boost for Tunnel Ridge in 2013

Alliance Resource Partners LP (NASDAQ: ARLP) is projecting that its Tunnel Ridge mine in Ohio County, W.Va., which got a longwall start in May, will turn out 2.1 million tons in 2012, growing to 5.8 million tons in 2013.

That projection was offered at the Dec. 4 Wells Fargo Securities MLP & Pipeline Symposium by Alliance CFO Brian Cantrell. He noted that Tunnel Ridge, which works the high-sulfur Pittsburgh No. 8 coal seam, will hit its full run rate of 6.2 million to 6.6 million tons per year in 2014.

U.S. Mine Safety and Health Administration data shows that Tunnel Ridge produced just under 1.2 million tons in the first nine months of this year, broken down as: 126,400 tons in the first quarter; 293,684 tons in the second quarter; and 762,110 tons in the third quarter (the first full quarter of longwall operation). That dwarfs the 275,227 tons the mine produced in all of 2011.

U.S. Energy Information Administration data shows that the Tunnel Ridge customers earlier this year included the Montour plant of PPL (NYSE: PPL) and the Hatfields Ferry, Sammis and Fort Martin plants of FirstEnergy (NYSE: FE).

Another in-development operation is the Gibson South deep mine in Indiana, which is near a long-existing deep mine of Alliance. The current prediction is for first production at Gibson South in the third quarter of 2014, with four continuous miners working initially, with a fifth CM added in 2016. The mine from its production start should be able to ramp up to its full run rate of 5.2 million tons per year in 2016.

Based in large part on this additional output from Tunnel Ridge and Gibson South, Alliance is projecting coal sales of just under 35 million tons this year, growing to just under 40 million tons in 2013, about 44 million tons in 2014, about 49 million tons in 2015, with only slight growth in 2016 to just under 50 million tons.

Cantrell noted that coal markets, due in part to production cuts by various coal producers, are starting to come into balance. He pointed out that Northern Appalachia and Illinois Basin coals, which are most of Alliance’s production, start competing well with natural gas when gas is in the $3-$3.50/mmBtu price range. He showed that gas prices have rebounded from less than $2/mmBtu at one point earlier this year, to a point north of $4/mmBtu lately.

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.