On June 28, the U.S. Bureau of Land Management in Colorado approved the Sunset Trail Area Coal Exploration Plan from an affiliate of Arch Coal (NYSE: ACI) to conduct coal exploration activities 11 miles east of Paonia, Colo.
The exploration plan, submitted by Ark Land on behalf of the operator of the West Elk longwall mine, Mountain Coal, consists of drilling ten holes during 2013 and 2014 to collect core samples within their lease area (federal coal leases COC-1362 and COC-67232).
Ark Land and Mountain Coal are both units of Arch Coal. In announcing June 28 the planned sale of its three coal mines in nearby Utah, Arch Coal said it was keeping West Elk.
Current reserves at the West Elk mine are estimated to last nine to 11 years, BLM noted. Exploration will provide additional data regarding the amount and quality of coal. The data is used to determine whether any additional mineable reserves are in the lease modification areas within the federal coal lease boundaries.
The exploration area is southeast of the West Elk mine and requires access road upgrades requiring one to two weeks of construction prior to moving the drill rig on site. The construction, drilling and reclamation activities will take an average of 16 days per hole with each drill pad at a maximum disturbance of 0.46 acres.
BLM on March 26 issued two lease modifications totaling 1,721 acres for the West Elk mine to extend mining operations up to three years and recover roughly 10.1 million tons of coal. Currently, the mine employs 378 people, and the majority of these employees, as well as their families, live in communities in Delta County. Total direct economic benefits associated with the coal mines located within the North Fork Valley exceed $60m annually.
U.S. Mine Safety and Health Administration data shows that the West Elk mine produced nearly 6.9 million tons in 2012, up sharply from 5.9 million tons in 2011. The mine produced 1.2 million tons in the first quarter of this year.
Arch Coal’s March 1 Form 10-K annual report said about this operation: “West Elk is an underground mining complex located on approximately 17,800 acres in Gunnison County, Colorado. The West Elk mining complex extracts steam coal from the E seam. We control a significant portion of the coal reserves through federal and state leases. The West Elk mining complex had approximately 80.4 million tons of proven and probable reserves at December 31, 2012. Without the addition of more coal reserves, the current reserves could sustain current production levels through 2025 before annual output starts to significantly decline. The West Elk complex currently consists of a longwall, one continuous miner section and a loadout facility. We ship most of the coal raw to our customers via the Union Pacific railroad. In 2010, we finished constructing a new coal preparation plant with supporting coal handling facilities at the West Elk mine site. The loadout facility can load an 11,000-ton train in less than three hours.”