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Researched by Industrial Info Resources (Sugar Land, Texas)--Arch Coal Incorporated (NYSE:ARCH) (St. Louis, Missouri) announced plans on Thursday to develop a new, world-class coking coal longwall mine in Barbour County, West Virginia, showing that while U.S. demand for thermal coal continues to weaken, opportunities still flourish in the seaborne metallurgical coal market.
With an estimated cost of $360 million to $390 million, the Leer South mine would produce 3 million tons per year of coking coal for the overseas market. Industrial Info has tracked the project since mid-2015. For more information, see Industrial Info's project report.
"We expect Leer South to be among the largest, lowest-cost and highest-margin coking coal mines in the United States," Arch Chief Executive Officer John Eaves said during the company's fourth-quarter 2018 earnings conference on Thursday. "That's particularly noteworthy, given that after a century of mining in the U.S., it is a highly mature region in terms of coke and coal output."
Leer South will be similar to Arch's existing Leer longwall mine, and it will operate in the same reserve base, the company said.
Arch Coal plans for the new longwall mine to be operational in the fourth quarter of 2021. The mine would produce High-Vol A coking coal, which Eaves said is in high demand across the globe.
"We believe that coking coal reserves that are suitable for mining are very scarce outside our Tygart Valley [mining operations in West Virginia], and when it comes to High-Vol A- quality coal, such reserves may be nonexistent," Eaves said. High-Vol A coal is increasingly being sought in the global marketplace and is increasingly scarce; as such it attracts a big premium in the marketplace, he continued.
The company said it plans to sell the output from Leer South into the 300 million-metric-ton-per-year seaborne coking coal market, where growth is being driven by steel sector growth in India and other developing Asian countries. U.S. coal exports increased by about 10 million short tons in 2018, when compared with 2017. For more information, see February 14, 2019, market brief - U.S. Coal Miners Plan More than $2.5 Billion in Projects.
There are many customers out there who we simply didn't have the volume to serve," Eaves said. "Based on our estimates, the global coking coal market will need to add between 70 and 80 million tons of new production capacity by 2025 in order to meet the new demand and offset depletion."
As such, the company estimates it will recover the cost of the Leer South mine within two years.
"That's extraordinary for a mine that's expected to operate for 20 years," Eaves said.
Arch Coal President and Chief Operating Officer said the company will redeploy longwall equipment from its existing Mountain Laurel operation to the new mine, reducing the cost of the project by $35 million.
Arch Coal isn't the only U.S. mining company to invest in seaborne markets. Peabody Energy (NYSE:BTU) (St. Louis, Missouri) is targeting capital investments of $375 million to $425 million in 2019 as it continues to grow its presence in the seaborne coal markets. Eighty percent of Peabody's capital investments last year were earmarked for its seaborne portfolios, specifically for capital expenditures and its acquisition of the Shoal Creek seaborne metallurgical coal mine in Alabama. For related information, see February 7, 2019, article - Peabody Energy to Boost Capital Expenditures, Targets Seaborne Markets.
For 2018, Arch recorded net income of $312.6 million, compared with $238.5 million in 2017.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
With an estimated cost of $360 million to $390 million, the Leer South mine would produce 3 million tons per year of coking coal for the overseas market. Industrial Info has tracked the project since mid-2015. For more information, see Industrial Info's project report.
"We expect Leer South to be among the largest, lowest-cost and highest-margin coking coal mines in the United States," Arch Chief Executive Officer John Eaves said during the company's fourth-quarter 2018 earnings conference on Thursday. "That's particularly noteworthy, given that after a century of mining in the U.S., it is a highly mature region in terms of coke and coal output."
Leer South will be similar to Arch's existing Leer longwall mine, and it will operate in the same reserve base, the company said.
Arch Coal plans for the new longwall mine to be operational in the fourth quarter of 2021. The mine would produce High-Vol A coking coal, which Eaves said is in high demand across the globe.
"We believe that coking coal reserves that are suitable for mining are very scarce outside our Tygart Valley [mining operations in West Virginia], and when it comes to High-Vol A- quality coal, such reserves may be nonexistent," Eaves said. High-Vol A coal is increasingly being sought in the global marketplace and is increasingly scarce; as such it attracts a big premium in the marketplace, he continued.
The company said it plans to sell the output from Leer South into the 300 million-metric-ton-per-year seaborne coking coal market, where growth is being driven by steel sector growth in India and other developing Asian countries. U.S. coal exports increased by about 10 million short tons in 2018, when compared with 2017. For more information, see February 14, 2019, market brief - U.S. Coal Miners Plan More than $2.5 Billion in Projects.
There are many customers out there who we simply didn't have the volume to serve," Eaves said. "Based on our estimates, the global coking coal market will need to add between 70 and 80 million tons of new production capacity by 2025 in order to meet the new demand and offset depletion."
As such, the company estimates it will recover the cost of the Leer South mine within two years.
"That's extraordinary for a mine that's expected to operate for 20 years," Eaves said.
Arch Coal President and Chief Operating Officer said the company will redeploy longwall equipment from its existing Mountain Laurel operation to the new mine, reducing the cost of the project by $35 million.
Arch Coal isn't the only U.S. mining company to invest in seaborne markets. Peabody Energy (NYSE:BTU) (St. Louis, Missouri) is targeting capital investments of $375 million to $425 million in 2019 as it continues to grow its presence in the seaborne coal markets. Eighty percent of Peabody's capital investments last year were earmarked for its seaborne portfolios, specifically for capital expenditures and its acquisition of the Shoal Creek seaborne metallurgical coal mine in Alabama. For related information, see February 7, 2019, article - Peabody Energy to Boost Capital Expenditures, Targets Seaborne Markets.
For 2018, Arch recorded net income of $312.6 million, compared with $238.5 million in 2017.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
