In its Q2 2020 earnings report, Alliance Resource Partners confirmed that underground coal production resumed in May at the River View and Warrior mines in the Illinois Basin (ILB) and subsequently at each of its remaining mining complexes — Gibson and Hamilton in the ILB and MC Mining in Appalachia. “All seven of our mining complexes are now producing coal,” said Joe Craft, chairman, president and CEO for Alliance. “However, several of these mines are running at less than capacity due to a limited spot market in the U.S. and a seaborne market that continues to be subeconomic for U.S. production.”
Alliance reported a net loss of $46.7 million for the second quarter, compared to a net income of $58.1 million for the second quarter of 2019. The decrease was attributed to the company’s decision to temporarily cease coal production at five of its seven mining complexes at the beginning of the second quarter in response to the impacts of the COVID-19 pandemic and coal market deterioration.
“We expected the energy demand destruction caused by the COVID-19 pandemic to negatively impact our results for the second quarter,” Craft said. “For the first half of 2020, coal-fired generation in the eastern U.S. declined 33% compared to the same time period in 2019.” Alliance’s coal production fell 56.9% to 4.3 million tons for the second quarter.
“While the pandemic continues to create uncertainty in the global economy and suppress energy demand, our customers have indicated their intention to take all tons contracted for this year,” Craft said. Alliance is currently targeting coal sales of 27 million to 28 million tons for 2020 and at the end of the second quarter it had sold 12.4 million tons.
The hydrogeologic model was developed based on data collected from an ISR field test completed in 2019. Based on positive results from the hydrogeologic model, Denison also announced details of its plans for the continuation of ISR field testing at Phoenix in 2020.
Denison VP Operations David Bronkhorst commented, “Petrotek applied a rigorous process of calibration to several numerical models developed based on hydrogeologic data collected from 19 test wells installed into the Phoenix deposit during the 2019 field test. Based on this site-specific data, the hydrogeologic model allowed for the simulation of an ISR wellfield, including a total of 18 extraction wells and 33 injection wells across Test Area 1 and Test Area 2 of Phoenix.
“Based on these simulations, Petrotek concluded that the results demonstrated ‘proof of concept’ for the use of ISR mining at Phoenix. This result represents a significant milestone in the ongoing de-risking of the use of the ISR mining method at Phoenix.
“Our plans for additional field testing in 2020 are expected to build on our success from 2019, further confirm the hydrogeological model completed by Petrotek, and prepare for field tests in future years, which are expected to support a feasibility study, including a potential in-ground lixiviant test or ISR demonstration.”
Field testing in 2020 is designed to further evaluate and derisk the ISR mining conditions present at Phoenix by supplementing the extensive dataset acquired as part of the 2019 field test. Hydrogeological data collected as part of the 2020 field test are expected to build additional confidence in the company’s understanding of the fluid pathways within Test Area 1 and Test Area 2, to further validate the hydrogeological model completed by Petrotek, and to prepare for field tests in future years. Key elements of the 2020 field test include additional pump/injection tests within Test Area 1 and Test Area 2 of the Phoenix deposit, groundwater sampling, permeameter analysis, and rock mechanics tests.
Denison previously announced a decision to temporarily suspend the environmental assessment process for the Wheeler River project and other discretionary activities due to the significant social and economic disruption that has emerged as a result of the COVID-19 pandemic. The work related to the 2020 field test is not part of the suspended activities and is included in the company’s evaluation budget contained within the current outlook and operating plan for 2020.
