Rhino Resource Partners soon will make its first shipment of high-sulfur steam coal from the new Pennyrile underground mine in Western Kentucky to Louisville Gas & Electric, a Rhino official said Monday.
Pennyrile, also known as Riveredge, is located near the Green River in McLean County. Initial production began in May.
Scott Morris, vice president of external reporting and investor relations for Lexington, Kentucky-based Rhino, said in an email the original sales contract with LG&E calls for the coal to be barged to "various" power plants operated by the PPL Corp. subsidiary. A sister utility, Kentucky Utilities, also is owned by PPL.
"The Pennyrile mine is expected to make its first shipment in the next few weeks," Morris said. "We expect the majority of shipments to be via barge from this mine."
LG&E operates several power plants that are scrubbed to reduce emissions of sulfur dioxide and mercury. Both LG&E and KU traditionally have burned large amounts of high-sulfur IB coal.
Rhino has a five-year contract to supply 800,000 st of coal annually to LG&E.
If fully developed, the mine has the capability of expanding to 2 million st a year.
Rhino is receiving "a lot of interest in coal from this mine, and we have test shipments to interested customers scheduled for later this year," Morris said. He did not identify those potential customers.
Nevertheless, Morris said his company believes "these test shipments have a high probability of leading to additional long-term sales contracts."
He added, however, Rhino will only enter into contracts "at acceptable prices."
Rhino is forecasting coal production and sales of about 3.75 million st in 2014, flat compared to last year. Total coal output and sales fell by 21% in 2013 compared with 2012 when the company produced and sold about 4.6 million st.
In Ohio's Northern Appalachian coalfield, Rhino is developing its first underground steam coal mine there to also serve the US electric utility market.
The new Rock Camp No. 1 mine is not expected to begin production until July 2015. It is targeted to produce about 40,000 st a month.
