CONSOL Prepares to Reopen Virginia Met-Coal Mine

If repairs go as planned, by month’s end one of Central Appalachia’s largest low-volatile metallurgical coal mines will be producing again.

An underground fire in mid-February idled CONSOL Energy Inc.’s Buchanan No. 1 mine, which is located near Keen Mountain in southwestern Virginia.

According to Tom Hoffman, CONSOL’s vice president of investor relations, the company plans to resume production at Buchanan before the end of June. That’s the time frame the market expected, said coal analyst Jim Truman, a principal and manager of Marylandbased Hill & Associates’ Westover office.

CONSOL recalled the mine’s regular workforce of more than 400 to complete underground repairs. Hoffman also said that although no cost estimate of damage is available, mine-safety rescue teams, which recently completed their underground inspections, found only limited damage to mine equipment and infrastructure.

Repairs focus primarily on stoppings, which are essentially block walls built across various underground mine entries to control the mine’s airflow, he said.

Once the company re-establishes mine ventilation consistent with Keen Mountain’s previously adopted mineventilation plan, Hoffman expects CONSOL to restore full power in the mine. Meanwhile, only limited electrical power is available underground to allow pumping of water that accumulated since the mine’s February closure, he said.

The closure affected CONSOL’s sales, as well as the met-coal market.

The mine has an estimated annual production of 4.4 million short tons of low-vol met coal, which it sells to both domestic and international customers. The shutdown will have cost more than 1.5 million tons of production by the end of June.

CONSOL reported a drop in sales between the first quarter of this year from the fourth quarter of 2004. Approximately half of that drop was due to the closure of Buchanan No. 1, according to the federal Energy Information Administration’s Coal News and Markets report for the week of May 31.

What happens if the Keen Mountain mine doesn’t reopen by the end of June or early July?

"The market will become tighter," Truman said.

He emphasized the met-coal market is so tight now that if the price per ton of met coal goes up and if companies cannot respond with more production, there could be more problems.

The industry’s reaction to the idling of Buchanan No. 1 reflected how stretched the market is, Truman said. "When Buchanan went down, no one said, as far as production goes, ‘Who cares?… That’s the response he’d expect if surpluses were available, he said.

Coke making and steel manufacturing could be affected if met coal becomes scarce enough.

Truman mentioned the severity of the eight-and-a-half-month shutdown of Pittsburgh-based PinnOak Resources LLC’s Pinnacle mine, near Pineville, which also produces low-vol met coal. Several underground methane ignitions closed that mine in September 2003.

"There were instances of force majeure on coal delivery and coke production," Truman said about the impact of Pinnacle’s extended closure.

Force majeure excuses someone or a company from not meeting contractual obligations because of uncontrollable circumstances. CONSOL invoked force majeure for all Buchanan No. 1 contracts, Hoffman said. That began after the company depleted its 270,000 tons of aboveground stockpiles in the first week of April. "Force majeure will be in effect until production resumes," he said.

Truman noted a recent announcement by a mining company also might aggravate the met-coal market. Last week, the company, Jim Walters Resources, said it would idle a low-volatile coal mine it operates in Alabama, he said.

That, plus Buchanan No. 1′s current idling, makes it tougher for coke manufacturers, Truman said. And that might drive longer-term actions by coal companies to reopen met-coal properties that have been closed for a while, he said.

Copyright State Journal Corporation Jun 10, 2005