Where does Arch Coal mine and what are the implications?
Arch Coal operates out of a total of 21 mines in the United States. The 21 mines are located in 4 main mining complexes, the Central Appalachia, Illinois Basin, Powder River Basin and the Western Bituminous. The coal harvested from each location differs in quality and serve different groups of customers.
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The Appalachia Region is divided into three portions, Northern Appalachia, Central Appalachia and the Southern Appalachia. The Northern Appalachia includes Maryland, Ohio, Pennsylvania and Northern West Virginia. The coal mined from this region has a heating capability of 10,300-13,500 Btu and a relatively high sulfur content ranging from 0.8%-4.0%.
- The Central Appalachia region includes Eastern Kentucky, Tennessee, Virginia and Southern West Virginia. The coal mined from this area has a higher heat value of 11,400-13,200 BTU and a lower sulfur content varying from 0.2%-2.0%.
- The Southern Appalachia region covers Alabama and the coal from this region has a heating value of 11,300-12,300 Btu and a moderate sulfur content ranging from 0.7%-3.0%.
All in all, Arch’s coal mines from the Appalachia are one of the top five US producers of metallurgical coal. As of 3Q 2013, Arch Coal controls just over 1 billion tons of coal reserves in this area. Out of which, 430 million have been characterized to be high quality metallurgical coal.
Arch Coal controls over 700 million tons of thermal coal reserves in this region in which the coals have heating capabilities ranging from 10,100 to 12,600 Btu and a sulfur content varying from 1.0% to 4.3%. This region mainly serves to export coal to the Atlantic Basin market via the Gulf of Mexico. Despite its higher sulfur content, coal from the Illinois Basin can be used by electric generation facilities that have pollution control devices such as scrubbers installed, to reduce emissions released into the atmosphere. Arch Coal has strategically increased its presence over the past few years and has increased its reserves from 18 million tons in 2012 to over 700 million tons to date.
Powder River Basin
The Powder River Basin, which is located in Northeastern Wyoming and Southeastern Montana, is the largest coal producing region in the United States. Coal from this region is thermal coal with very low sulfur content ranging from 0.2% – 0.9% and has heating capabilities varying from 8,000 – 9,500 BTU. The cost of mining in this region is generally cheaper as it is easier to mine. This is because the Powder River Basin has the largest coal seam on the planet and that the coal is closer to the surface, thus leading to a lower cost of production. Coal from this area is shipped to both domestic and international customers. As of 3Q 2013, Arch Coal controls a total of 3.3 billion tons of thermal coal reserves in the Powder River Basin which comprises around 66% of the entire company’s coal reserves.
The fourth area, Western Bituminous covers Colorado, Utah and Southern Wyoming. The thermal coal in this region has a very low sulfur content of 0.4% – 0.8% and has heating values of 10,000 – 12,200 BTU. In this region, Arch Coal operates one large underground long wall mine and ships the coal to domestic and international customers. Arch Coal controls around 300 million tons of recoverable thermal coal reserves in this region as of 3Q 2013.
Probable reserves represent a good chance of the presence of said amount of coal and proven reserves means that significant geologic tests have been tested and the geologic characteristics and said amount of coal has been well established. Likewise with all of Arch Coal’s mines, proven and probable reserves does pose a slight risk if the actual amounts of coal is less than the predicted amount, but it serves as a general guide of the possible production capacity of each mine.