SunCoke to slash coal production while it tries to sell coal mines

SunCoke Energy (NYSE:SXC) said Dec. 15 that while it is still trying to sell its coal mining operations, located mainly in southwest Virginia, it is executing a phased plan to scale back this business.

“While we plan to continue pursuing opportunities to sell all or a portion of our Coal Mining business, the challenging coal price environment has led us to make these hard decisions,” said Fritz Henderson, Chairman and Chief Executive Officer of SunCoke Energy. “I’ve been very impressed by and thankful for the leadership and commitment of our coal team, which has consistently achieved high levels of productivity, safety and regulatory compliance during this difficult time. However, idling a significant portion of the Coal Mining business is the right step going forward and allows us to focus on our core competencies of processing and handling raw materials for industrial customers.”

The company’s initial actions include immediately idling certain mines to reduce coal production from approximately 1.1 million annual tons to about 500,000 annual tons of mid-vol metallurgical coal and eliminating approximately 175 positions. In the short term, SunCoke expects to continue to mine about 500,000 annual tons as it pursues a sale or explores other alternatives such as potentially retaining contractors to mine on its behalf or purchase all its coal requirements to supply its Jewell Coke facility, located in southwest Virginia near its coal mines. SunCoke also plans to reduce operations at its coal prep plant by 50% to further reduce costs.

SunCoke said it will continue to incur costs whether it mines the mid-vol portion of Jewell Coke’s coal supply requirements or purchases all coal from third-parties. If it is ultimately unsuccessful in selling the Coal Mining business and mining mid-vol coal becomes less economic than procuring from third-party sources, it may decide to idle the remaining mines, demolish the prep plant and purchase all Jewell Coke coal requirements from third-parties.

The anticipated impact to Jewell Coke of purchasing 100% third-party coal is estimated to be approximately $20m annually, primarily due to incremental coal transportation and material handling costs. This is approximately $20m favorable to the anticipated cash loss of continuing to operate the Coal Mining business absent any wind down actions.

SunCoke Energy is the largest independent producer of coke in the Americas. Its advanced, heat-recovery cokemaking process produces high-quality coke for use in steelmaking, typically captures waste heat for derivative energy resale and meets or exceeds environmental standards. U.S. cokemaking facilities are located in Virginia, Indiana, Ohio and Illinois. The coal mining operations, which have more than 110 million tons of proven and probable reserves, are located in southwest Virginia and southern West 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.