Paringa makes progress on capital costs for western Kentucky coal mine project

Paringa Resources Ltd. said Nov. 3 that it has received competitive bids for all major capital items for the construction and development of the company’s planned Buck Creek No. 1 Mine in western Kentucky.

These bids were received as a result of an extensive six-month contract negotiation and bidding process for all major capital items including site development, electrical substation and infrastructure, slope (decline) construction, shaft excavation, mine fan and escape hoist, surface facilities, coal preparation plant, materials handling, overland conveyor belt and barge load-out facility. Due to the competitive bidding process between several highly experienced contractors, there will be a significant saving to the initial total capital estimate used in the Pre-Feasibility Study (PFS) for the mine, Paringa said.

Paringa President and CEO David Gay, said: “This is an outstanding outcome for Paringa and the result of long and hard work from our US management team. We are looking forward to continuing discussions with potential financiers this year and have received exceptional feedback since announcing our cornerstone coal sales agreement with LG&E and KU.” LG&E is Louisville Gas and Electric and KU is Kentucky Utilities, two utilities with coordinated coal buying that are subsidiaries of PPL Corp. (NYSE: PPL).

All construction services, construction personnel, contractors and parts will be supplied by firms who are operating in the region. Capital costs for the Buck Creek No. 1 Mine have been benchmarked against similar underground mines in the region that mine the project’s West Kentucky No. 9 coal seam in similar conditions, utilizing identical mining and processing techniques and equipment. In addition, the capital intensity (inclusive of leased equipment) of the Buck Creek No.1 Mine is similar to other new coal developments in the Illinois Basin by publicly-listed companies that have started construction since 2007.

Other major producers in western Kentucky that have developed mines within that time period are Alliance Resource Partners LP and Armstrong Coal. Patriot Coal pulled out of the region a couple of years ago, as did Oxford Resource Partners.

Final bid awards and construction contract executions will align with the completion of formal negotiations with financiers to develop the Buck Creek No. 1 Mine. In addition, results of the final construction bidding process including a detailed breakdown of major capital items and comparisons to the total initial estimate used in the PFS, will also be incorporated in the Bankable Feasibility Study (BFS) which is due to be completed during the current quarter.

Paringa said it is still evaluating bids received for some of the smaller items of the capital budget to develop the Buck Creek No. 1 Mine and the final initial total capital cost adopted in the BFS may change slightly.

The Buck Creek Mining Complex is located in the western Kentucky region of the Illinois Basin, which is one of the most prolific coal producing regions in the United States. Paringa controls over 34,556 gross acres of coal leases within an area of interest of approximately 72,000 acres. The Buck Creek Mining Complex is one of the few remaining contiguous high quality thermal coal projects within the No. 9 seam that is not controlled by one of the major U.S. coal companies. The Buck Creek Mining Complex has a JORC Measured and Indicated Coal Resource Estimate of 211 million tons.

The Buck Creek Mining Complex is located adjacent to the Green River which provides year-round linkage to the Ohio and Mississippi rivers systems. These systems feed domestic coal-fired power plants and coastal export coal terminals in the Gulf of Mexico.

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.