Atlantic Coal wants to move fast on new Pennsylvania mine

Atlantic Coal plc said May 23 that in 2012 it was able to sharply increase production at its anthracite coal mining operation in Pennsylvania and that it is on a fast track to developing a newly-acquired mining property nearby.

In 2012, the company increased production and sales at its Stockton mining operation, with 161,529 tons of clean coal produced and sales of 140,213 tons achieved (2011: 100,139 and 106,403 respectively).

Another highlight from 2012 was that the company was able to relocated a Norfolk Southern Railroad line at Stockton, providing access to about 1.0 million tons (Mt) of previously unworkable coal that was under that track.

Highlights in 2013 so far include exercising a lease option agreement with Reading Anthracite over the fully permitted Pott & Bannon anthracite mining property in Schuykill County believed to contain 4.1 Mt of clean coal. There was also a 67% increase in clean coal production at Stockton and 91% increase in coal sales in Q1 2013 to 53,131 tons and 53,324 tons respectively (Q1 2012: 31,729 tons and 27,913 tons).

In February 2012, Atlantic Coal announced that it had entered into an option agreement to acquire additional anthracite mining assets in Pennsylvania. This option expired on March 31. Subsequent to the expiration of the option the company held a number of discussions with the vendor on a further extension of the option period. But Atlantic Coal eventually decided not to move forward and terminated discussions with the vendor.

With its current reserves, the Stockton Colliery has an eight-year mine life and includes an anthracite prep plant capable of washing 300,000 tons of coal per annum of various sizes on the premises for use in different industries. The vast majority of Stockton’s product is sold into the U.S. and Canadian market, but sales have lately been expanded outside North America, with a cargo of 11,000 tons of anthracite shipped from the Fairless Hills Port at Philadelphia to Germany.

Half of the Pott & Bannon sales committed to Reading Anthracite

The 410-acre Pott & Bannon site is located 25 miles from Stockton and is ideally located close to major east-coast transportation hubs. Like Stockton, the Pott & Bannon site will mine the high quality Mammoth seam. The company believes that the site could contain up to 13.6 million tons run-of-mine coal, equating to approximately 4.1 Mt of washed, saleable anthracite. The average strip ratio was estimated to be 3.9 run of mine (ROM). These estimates are based on older work by consultant John T. Boyd & Co. Atlantic Coal is in the process of confirming these resource details with a qualified competent person.

Atlantic Coal has agreed with Reading Anthracite to use best endeavours to deploy mining equipment at the property to achieve a minimum production of 400,000 tons of ROM coal in the second year of the lease, provided that market conditions warrant such a level of production. The delivery of coal to Reading Anthracite as part of the purchase consideration is being accelerated, with a target for site operations to commence in the first half of 2014.

Reading Anthracite will have the option to purchase (at certain pre-agreed prices) up to 50% of all sizes of standard coal each year. However, in the event that any portion of the US$2.5m consideration is paid by Atlantic Coal to Reading Anthracite in the form of ROM or clean coal from the property, then Reading Anthracite’s right to purchase 50% of all sizes of standard coal from the property would be reduced on a ton-for-ton basis at the price of US$120 per ton until such time as the entire consideration has been satisfied in full at which point RAC’s purchase option rights under the coal purchase agreement will be restored in full.

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.