Hallador Energy, the parent of Indiana coal producer Sunrise Coal LLC, reported in its Nov. 4 quarterly Form 10-Q statement that in conjunction with a major cutback in production at the Carlisle Mine, it conducted a review of those assets for recoverability and determined that no impairment charge was necessary.
In conducting this review, Hallador assumed: that natural gas prices will start to increase in late 2017; (Carlisle production will increase in 2018-2019, and sometime in 2020, Carlisle will return to its normal production capacity of 3.3 million tons per year. The Carlisle assets had an aggregate carrying value of $134 million at Sept. 30, 2016.
Also, on March 22, 2016, Hallador completed the purchase of the Freelandville coal reserves and coal sales agreement for $18 million. These reserves totaled 14.2 million tons of fee and leased coal and will be mined from the Oaktown 1 portal. This purchase also allows Sunrise access to another 1.6 million tons of its own leased reserves that were previously inaccessible. The purchased coal sales agreement totaled 1,435,000 tons (can be adjusted +/- 6,700 tons monthly).
This buy of coal reserves and a coal sales agreement is associated with Triad Mining LLC’s Freelandville mining complex. Triad is a wholly-owned subsidiary of Blackhawk Mining LLC based in Lexington, Kentucky. The Freelandville complex is located in Sullivan and Knox counties, Indiana. As part of the transaction, Hallador purchased the 14.2 million tons of proven coal reserves and associated advanced royalties in addition to rights under a coal sales agreement that extends through 2017.
Hallador reported that Oaktown’s cash costs for Q3 2016 were $29.57/ton. It sees Oaktown’s costs ranging from $28 to $30 for the remainder of 2016.
For the first nine months of 2016, Hallador has sold 4,578,000 tons at an average price of $45.31/ton. For the same period in 2015, it sold 6,015,000 tons at an average price of $45.51/ton. Operating costs and expenses averaged $31.04/ton in 2016 compared to $31.82 in 2015.
For the third quarter of 2016, it sold 1,485,000 tons at an average price of $44.01/ton. For the third quarter of 2015, it sold 1,791,000 tons at an average price of $45.41/ton. Operating costs and expenses averaged $31.61/ton in 2016 compared to $31.82 in 2015.
The company is committed to sell 1.7 million tons of coal in the fourth quarter of this year and 4.9 million-5.5 million tons in 2017.