Paringa Breaks Ground on New Poplar Grove Mine

Paringa Resources Ltd., the newest entrant in the Illinois Basin (ILB) steam coal market, began construction in August on its 2.8-million-ton-per-year (t/y) Poplar Grove underground steam coal mine, the first of two deep mines planned by the Australian company for its extensive Buck Creek reserve in western Kentucky.

Site work got under way in the Mc- Lean County/Hopkins County area near the Green River less than 18 months after the company flip-flopped its original plans and decided to build the low-capital expenditure Poplar Grove mine before the 3.8-million-t/y Cypress mine.

Current plans call for Poplar Grove to produce its first coal around mid-2018, and ramp up output from both the western Kentucky Nos. 9 and 11 seams by the end of 2020. Depending on market conditions, construction could start on the fully permitted Cypress mine in early 2019. Poplar Grove is expected to have a mine life of 25 years, and Cypress, a life of around 18 years.

Under an amended “cornerstone” sales agreement, Paringa is contracted to deliver a total of 4.75 million tons of 11,200 Btu/ lb product from Poplar Grove over a five-year period, starting in 2018, to Louisville Gas & Electric Co. (LG&E) and Kentucky Utilities Co. (KU), the state’s largest electric utilities and subsidiaries of Pennsylvania-based PPL Corp. LG&E and KU serve more than 1.1 million customers and own four major coal-burning power plants in the commonwealth.

The LG&E/KU contract begins at $40.50/ton for the first 750,000 delivered tons, escalating to $45.75/ton for the final 1 million tons sold. The vast majority of Poplar Grove’s 2018 production is earmarked for LG&E/KU, although some tons will be reserved for test burns at other utilities.

As Paringa moves through the construction phase and nears first coal from Poplar Grove, it plans to begin participating actively in the coal solicitation process to sell additional coal to electric utilities located in the Ohio River market. Eventually, the company also intends to aggressively target coal sales to the secondary Southeastern market.

Paringa said it was drawn to the western Kentucky part of the ILB because of the quality of the coal, the dynamics of the region’s market and the inherent infrastructure and transportation advantages. It plans to make heavy use of the nearby Green River, a deep, navigable waterway that empties into the Ohio River less than 30 miles from the mine site.

Paringa credits the administration of U.S. President Donald Trump, a strong supporter of the coal industry, for its decision to move the Poplar Grove project to the construction stage. “Without the Trump administration ending the ‘war on coal,’ we would not be building out this mine,” the company said. “The administration has been effectively removing barriers and regulations that were unfairly punitive for the coal industry.”

Grant Quasha, Paringa’s managing director and CEO, said he believes the next 12 months will be “very exciting as we progress through the construction phase and toward first coal production, advance negotiations with utilities located within the Ohio River and Southeast markets potentially leading to additional sales contracts, continue discussions with advisers for a potential listing on major U.S. stock exchange, and begin to roll out our public relations and digital marketing campaign throughout North America.”

As featured in Womp 2017 Vol 10 -