For the first quarter of 2015, Indiana producer Sunrise Coal LLC sold 2,146,000 tons at an average price of $45.23/ton, against 776,000 tons sold in the first quarter of 2014 at an average price of $42.55/ton.
Sunrise Coal parent Hallador Energy reported the first quarter results in a May 8 Form 10-Q quarterly report. The big boost in tonnage was due to the August 2014 acquisition of Vectren Corp.‘s three underground coal mines in Indiana: Oaktown 1 and Oaktown 2 in Oaktown, Indiana; and the Prosperity mine located in Petersburg, Indiana. The Prosperity Mine was idled in August 2014. The two underground mines located near Oaktown, Indiana are seven miles south of Sunrise’s Carlisle underground mine. Oaktown 2 is contiguous to the Carlisle mine and War Eagle reserve. “Thus, we intend to mine part of Oaktown 2’s reserve from our Carlisle portal and all of our War Eagle reserve from the Oaktown 2 portal,” said the Form 10-Q.
Oaktown 1, Oaktown 2, Carlisle and War Eagle are now one large underground mining complex representing 160 million tons of controlled reserves, with three portals, two wash plants and two rail facilities, located on the CSX Transportation rail system. Sunrise anticipates total capacity for the three mines to be roughly 9.7 million tons annually. Additionally, the capacity of the Ace in the Hole strip mine is 0.5 million tons annually. Thus, the company’s total mining capacity is 10.2 million tons annually.
For 2015, over 86% of coal sales are to customers with large scrubbed coal-fired power plants in Indiana. The company sells coal to the following customers: Duke Energy (NYSE: DUK), Hoosier Energy Electric Cooperative, Indianapolis Power & Light, Northern Indiana Public Service Co. and Vectren Corp. (NYSE: VVC). It also delivers coal to three Florida utilities. “We believe these Florida sales are an indication of the trend of [Illinois Basin] coal replacing [Central Appalachia] coal that has traditionally supplied the southeast markets,” the company noted.
The company has 17.88 million tons committed but unpriced through 2024. Roughly one third of these tons reprice every year for a three-year period. Committed tons are a firm commitment, meaning the company is required to ship and the customer is required to receive said tons through the duration of the contract. The contracts provide mechanisms for establishing a market-based price.
All of Sunrise’s underground coal reserves are high sulfur (4.5-6#) with a BTU content in the 11,200-11,500 range. The Ace in the Hole surface mine is low sulfur (1.5#) with a BTU content of 11,400.