September 8, 2008

CONSOL to Resume Limited Production at Shoemaker

By Harris, Linda

Development issues at other mines during the second quarter forced CONSOL Energy to resume limited production at the Shoemaker operation, something it didn't expect to do until 2010.

The mine, idled in 2006 while a new, underground belt haulage system was installed, is expected to run the rest of this year and possibly longer using the old rail hauling system to move coal.

"We didn't plan to restart Shoemaker in the second quarter," CONSOL Chief Financial Officer Bill Lyons told analysts during a conference call to discuss the company's second-quarter performance. "However, due to development issues at McElroy we decided that tactically it was in our best interests to restart this mine before all the major productivity improvements have been completed, even though it would lead to higher costs."

The company said the lower production, higher labor costs and higher supply costs impacted second-quarter operations, though it still posted a healthy $101 million profit for the quarter.

Chief Executive Officer J. Brett Harvey said higher energy prices were key to those numbers, with natural gas prices up 24 percent period-to-period and coal prices up 15 percent. He said global energy demand still favors the higher pricing environment for the foreseeable future, despite mixed economic news in recent months.

"Our current plan, which is always subject to finalization, is that Shoemaker would continue to run in 2009," CONSOL spokesman Tom Hoffman said. "(But) it won't run at any kind of normal, full production level."

Hoffman said Shoemaker is expected to mine about 800,000 tons in the second half of this year. When the new belt conveyor comes online in 2010, production will be ramped up to normal levels.

CONSOL's decision comes less than a month after the company announced a $800 million joint venture with Houston-based Synthesis Energy Systems to build a coal-to-liquids plant near Shoemaker in Marshall County. The gasification plant will feed off a mix of Shoemaker's raw coal and wastes from its prep plan.

Copyright State Journal Corporation Aug 15, 2008

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