Kentucky Coal Project Fate Unknown as Phoenix Coal Leaves Coal Mining Business

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Researched by Industrial Info Resources (Sugar Land, Texas--Phoenix Coal Incorporated (TSX:PHC) (Louisville, Kentucky) has entered into a definitive agreement with an unnamed major U.S. coal producer to sell the company's remaining coal reserve for $23 million, effectively cancelling the company's planned $150 million coal mine project--at least for the time being.

The Gryphon property, located a few miles north of Sebree, Kentucky, includes 46.1 million tons of proven and probable reserves (28.6 million tons of measured and indicated resource). The property was being permitted as a 4 million-ton-per-year underground coal mine complex with a 1,000-ton-per-hour preparation plant.

This reserve has three major strategic advantages: geographic, transportation and quality. It is located within 45 miles of nine coal-fired power plants and is also near major transportation routes, enabling future coal to be shipped to customers via rail, barge, truck and conveyor belt. The reserve contains low-chlorine coal, desired by many utilities that burn Illinois Basin Coal.

The Gryphon property was Phoenix Coal's last coal asset to be sold.

On September 30, 2009, the company sold all of its surface coal mining assets (active operations as well as reserves) to privately-owned Ohio-based coal producer Oxford Mining Company LLC, a subsidiary of Oxford Resource Partners LP (Coshocton, Ohio) for approximately $32.2 million. At this time, the fate of the Gryphon project became uncertain, although company officials were still committed to developing it.

In February 2010, Phoenix sold its Panama South reserves to another unnamed major U.S. coal producer for $10 million. After this sale, the company began evaluating other strategies in regards to the Gryphon property, including selling it.

After announcing the intent to sell the company's Gryphon asset in March, Phoenix Coal announced just over a week later that it planned on changing its concentration from coal mining to mining of other natural resources. To represent the company's new focus, Phoenix plans to change its name to Elgin Mining Incorporated, pending shareholder approval. The company has also appointed Chairman Robert M. Buchan as chief executive officer, and once everything is finalized, the headquarters will be moved from Louisville to Toronto, Ontario.

One might speculate which major coal producer will purchase the Gryphon reserves and whether this project will come back to life under its new owner. Currently, the top five producers in the U.S. are Peabody Energy Corporation (NYSE:BTU) (St. Louis, Missouri), Arch Coal Incorporated (NYSE:ACI) (St. Louis), CONSOL Energy Incorporated (NYSE:CNX) (Canonsburg, Pennsylvania), Alpha Natural Resources Incorporated (NYSE:ANR) (Abingdon, Virginia) and Massey Energy Company (NYSE:MEE) (Richmond, Virginia).

Peabody is currently the world's largest private-sector coal company, with 2009 sales of 244 million tons and $6 billion in revenues. Peabody's coal products fuel 10% of all U.S. electricity generation and 2% of worldwide electricity. Peabody owns majority interests in 28 coal mining operations in the U.S. and Australia.

Arch Coal is the second-largest U.S. coal producer, with 126.1 million tons of coal sold in 2009. Arch Coal, through its national network of mines, contributes almost 16% of America's annual coal supply. As of December 31, 2009, it operated 19 active mines at 11 mining complexes in the U.S.

CONSOL Energy comes in third in terms of coal sold in 2009. The company is the largest producer of high-Btu bituminous coal in the U.S. and a leader in the production of coalbed methane gas. Coal and gas collectively fuel two-thirds of all of the nation's power generation.

With its merger with Foundation Coal in July 2009, Alpha Natural Resources became the fourth-largest American producer of coal. In 2009, Alpha sold 47.1 million tons of coal. The company operates 61 mines and 14 coal-preparation plants in northern and central Appalachia and the Powder River Basin.

Massey Energy Company produces, processes and sells bituminous coal of various steam and metallurgical grades, primarily of low-sulfur content. At January 31, 2010, the company operated 56 mines, including 42 underground mines. Massey sold almost 38 million tons of coal in 2009.

Once the business transaction has gone through and the Gryphon property has been sold, company officials seem to think the next company may continue to develop the property, but only time and market conditions will tell.

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