ICG plans heavy investment in met coal mines

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Associated Press

Posted on February 3, 2011 at 6:01 PM

CHARLESTON, W.Va. (AP) — International Coal Group plans to spend heavily in 2011 to increase production of metallurgical coal for steelmakers, company officials said Thursday.

Chief Executive Ben Hatfield's comments came during a conference call with securities analysts.

ICG expects to spend between $225 million and $245 million on capital projects this year. A big chunk of that — approximately $80 million — will be spent on developing the Tygart Valley No. 1 mine in Taylor County, W.Va. The mine is expected to start producing a small amount of coal late this year, Hatfield said.

ICG hopes to produce 3.5 million tons of coal annually at Tygart Valley once the mine is at full capacity. Hatfield expects to have invested $325 million by then.

"We've spent thus far about $28 million through the end of 2010," Hatfield said. "The majority of the earth work is now complete."

Work on the mine resumed last year after the state reinstated a permit over protests from opponents concerned that the state Department of Environmental Protection had approved an inadequate water-treatment plan

The investment is all about high-priced metallurgical coal.

Strong world demand has pushed up prices for metallurgical coal, which is used to make coke, a key ingredient in manufacturing steel and Appalchian producers are scrambling to cash in, especially since bad weather has hammered Australia's coal industry.

That demand is also a key factor in Alpha Natural Resources' pending $7.1 billion takeover of Massey Energy Co. Combined the pair would control approximately 29 percent of the U.S. supply of metallurgical coal.

ICG is getting $110 to $230 a ton for met coal currently, senior vice president Mike Hardesty said during the conference call.

Coal sold to electric power plants sells for far less than metallurgical coal. ICG expects prices to average $73 to $77 a ton for all its coal in 2011. Production should range from 16.1 million and 16.7 million tons, including 3.1 million to 3.5 million tons of metallurgical coal.

Scott Depot-based ICG operates 12 mining complexes in Appalachia and one in Illinois.

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