Foresight Energy LP (NYSE:FELP) said March 15 that efforts to restore coal production have been unsuccessful at the Hillsboro Energy Deer Run underground mine and, as a result, authorization has been sought to temporarily seal the mine.
Foresight reported the news in a 10K filing with the Securities and Exchange Commission (SEC).
Underground mining has been halted since a March 2015 spontaneous combustion underground. This month company officials have asked the federal Mine Safety and Health Administration (MSHA) “for permission to take the next step of temporarily sealing the entire mine to reduce or eliminate oxygen flow paths into the mine.”
“We are uncertain as to when production will resume at this operation but we will continue to work closely with MSHA and the Illinois Office of Mines and Minerals Mine Safety and Training Division to ensure the safety of our employees throughout the process and to explore alternatives to safely resolving this issue,” Foresight said.
“We can make no assurances” on when operators might be able to resume production at the Deer Run Mine, “and therefore, it may be permanently closed,” Foresight went on to say. “If we are unable to regain access to the Deer Run Mine and we terminate the force majeure event, we may be obligated to pay the minimum royalty payment without the corresponding production and sales. As a result, our results of operations, business and financial condition, as well as our ability to meet our debt obligations and resume payment of distributions to our unit-holders may be materially adversely affected.”
The sealing of the Deer Run mine is not the only bad news for Foresight in the March 15 SEC filing.
Foresight noted that that it missed a $23.6m interest payment on Feb. 16 and invoked a 30-day “grace period” to gain more time. In the report, Foresight said it is “actively negotiating” an out-of-court settlement with certain note-holders.
If an out-of-court restructuring is not agreed to with the note-holders “it may be necessary for us to file a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in order to implement a restructuring, or our creditors could force us into an involuntary bankruptcy or liquidation,” Foresight said.
Foresight recaps coal marketing and sales for recent years
“During the years ended December 31, 2015, 2014 and 2013, we generated total revenues of $984.9 million, $1,109.4 million and $957.4 million, respectively.” Its primary domestic customers are electric utilities in the eastern half of the United States.
Foresight said its three largest customers in 2015 were Southern (NYSE:SO), Dayton Power and Light and EDF Trading, representing approximately 21.5%, 11.9% and 10.7% of Foresight’s total tons sold, respectively.
“The international thermal coal market has also been a substantial part of our business with direct and indirect sales to end users in Europe, South America, Africa and Asia,” Foresight said in the 10K.
“During the years ended December 31, 2015, 2014 and 2013, export tons represented approximately 24%, 30% and 33% of tons sold, respectively. The charts below illustrate our sales mix, by destination, for the years ended December 31, 2013, 2014 and 2015.”
Foresight said that for 2016, “we have 18.4 million tons of our projected production contractually committed with 23 separate customers.”
Foresight Energy LP does not have direct employees. The 30 corporate staff members are employed by Foresight Energy Services LLC. Each operating subsidiary has a contract in place with a contract operating for the mining and processing of coal.
As of Dec. 31, 2015, the various operations had about 760 contract workers. None of the operations have workers represented by a union.
Foresight is a leading coal producer in the Illinois Basin with control of over three billion tons of coal reserves currently supporting four mining complexes.