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Patriot, Blackhawk predict jump in 2017 coal sales for mines in bankruptcy deal

Patriot Coal and Blackhawk Mining expect to see a jump in coal sales from the 12 mines the two producers hope to merge into a new company, bankruptcy court documents showed.

In a disclosure statement for reorganization filed July 13 with the Bankruptcy Court for the Eastern District of Virginia, Patriot and Blackhawk outlined a projection for sales through 2019 for the new combined company's operations.

In the filing, the producers predict coal sales to see a 28.4% year-on-year increase in 2017 to about 25.2 million st, up from 19.6 million st in 2016. The reason for the increase in sales was not explained in the filing.

Patriot and Blackhawk declined to comment Tuesday on the projected increase in 2017 sales, as the court has yet to approve the disclosure statement.

Of the estimated 2017 sales, only 13%, or 3.3 million st, are already contracted, the document showed. The producers have 3.6 million st already contracted for 2016, about 18% of predicted sales.

The 12 West Virginia mines in the deal, which include thermal and met products, produced 11.4 million st in 2014. Through the first half of 2015, production was down 15% at the mines compared with the year-ago period, falling to 5 million st from 5.9 million st in 2014.

COAL SALES VOLUMES TO SLIP IN 2019

In the court filing, Patriot and Blackhawk predicted coal sales volumes from the mines will increase to 26.3 million st in 2018 before slipping to 25.4 million st in 2019. About 5%, or 1.2 million st, of anticipated 2018 sales are contracted, and no sales for 2019 have been contracted.

For the fourth quarter of this year, the companies expect to sell 5.2 million st, with 2.8 million st already contracted, at an average price of $63.20/st.

Patriot and Blackhawk see a steady year-on-year increase in the sales price of coal. The companies predict coal prices to average $63.70/st in 2016, $65.10/st in 2017, $67/st in 2018 and $71.50/st in 2019. During the same span, production costs will remain relatively flat at annual costs of $53.10/st, $52.10/st, $51.40/st and $52.40/st, respectively.

source: http://www.platts.com