Despite coal's woes, executive sees opportunity to edge into market with new Wyoming mine

Coal's plunging fortunes and notoriety as the fuel blamed most for global warming aren't discouraging one company that has purchased 1.2 billion tons of coal reserves in three U.S. states and is planning Wyoming's first major new coal mine in 40 years.

Ramaco's strategy in Wyoming, the top coal-mining state: Dig the coal out as cheaply as possible, and think small.

Lexington, Kentucky-based Ramaco plans to mine 2 million tons a year at first and eventually no more than 8 million tons annually at its Brook Mine, a few miles north of the northern Wyoming city of Sheridan. By comparison, the biggest coal mine in the U.S., Peabody Energy's North Antelope Rochelle Mine, produces 2 million tons a week about 100 miles southeast of the Brook Mine site.

"Small is beautiful, because we've got a mine that can be very profitable for us, but it's not so huge that it creates a lot of the financing and other logistical issues," Ramaco CEO Randall Atkins said.

Atkins has more than 30 years of experience as an investment adviser specializing in energy resources. He divides his time between New York, Kentucky and Wyoming, where he has a home at the exclusive Powderhorn golf development near Sheridan.

"I'm usually at about 30,000 feet most of the time, but this is where I call home now," he said at Ramaco's Sheridan office, a two-story log building with a view of the city and the Bighorn Mountains foothills.

A century ago, the rolling prairie just outside Sheridan used to be home to several small mines that provided coal for steam-powered locomotives. Nowadays, the nearest coal mine is Cloud Peak Energy's Spring Creek Mine, which produces about 18 million tons a year and employs around 300 people about 20 miles north of Sheridan in southern Montana.

Wyoming produces more than 40 percent of the nation's coal and most of it comes from the Powder River Basin, the top coal-producing region in the U.S.

The Brook Mine on the basin's western edge would be among Wyoming's smallest but would still rank among the top 25 nationwide. After an investment of well over $100 million, the mine will open in the fall of 2016, if all goes according to plan.

It's an audacious one. Times have been terrible for Wyoming's coal industry.

Proposed federal regulations announced in June to cut nationwide carbon dioxide emissions 30 percent below 2005 levels by 2030 dimmed the outlook for coal-fired electricity, which already has been hit hard in recent years by low prices for cleaner-burning natural gas.

Exporting Wyoming coal overseas would help ensure a market for U.S. coal regardless of domestic regulations. But in August, Oregon rejected plans for a Columbia River terminal intended to facilitate exports of Powder River Basin coal to Asia.

Atkins is less concerned about the obstacles facing coal than carving out a place in the market regardless of market conditions.

Not since 1975 has an entirely new, major coal mine opened in Wyoming, according to the Mine Safety and Health Administration. The Brook Mine will have around 200 employees and initially will target an estimated 100 million tons of recoverable reserves underlying 14,500 acres five miles south of the Montana line.

The coal will take nearly 20 years to mine. Other Powder River Basin mines extract more coal than that in a single year but have vastly bigger costs, Atkins said.

Unlike most coal elsewhere in the basin, the Brook Mine coal doesn't belong to the federal government. Ramaco has bought almost 90 percent of the coal outright from private owners, saving itself a 12.5 percent federal royalty.

Also, Ramaco plans to employ highwall mining, which involves digging a trench to reach the target coal and auguring sideways up to half a mile through the 12-to-15-foot-thick target seam. Nearly all coal in the Powder River Basin comes from open-pit mines, but highwall mining can be less expensive because not nearly as much overlying dirt and rock needs to be removed, Atkins said.

Meanwhile, the heat value of the Brook Mine coal, about 9,100 British thermal units, is about 6 percent above the Powder River Basin average. That's attractive to coal-burning power companies because it can save money.

Ramaco very well might succeed in claiming a share of the coal market by keeping costs down compared to other producers in the Powder River Basin, said Daniel Rusz, a coal analyst with the mining industry research firm Wood Mackenzie.

"The Powder River Basin has some of the lowest costs in the world for coal mining operations, so that's certainly going to be critical here," Rusz said.

Private equity firm Yorktown Partners LLC along with Atkins and another energy industry executive, Michael Bauersachs, started Ramaco — a private limited liability company whose name stands for Randy And Mike Acquisition Company — in 2011. The company also has bought a total of 97.5 million tons of metallurgical coal reserves — coal used in steel mills — in Pennsylvania and West Virginia.

The Brook Mine already has a BNSF rail line nearby and just needs a new loop and loading facilities to get the coal to power plants, according to the company.


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