May 16, 2019 - Contura Energy, the largest coking coal producer in the U.S., plans to invest $25mn-30mn in a new coking coal project in Logan county, West Virginia.

The firm plans to produce 1mn-1.2mn short tons a year (st/yr) of high-volatile coking coal from estimated reserves of 25mn st, starting from the second quarter of 2020.

This acquisition follows Contura's purchase of Alpha Natural Resources in the fourth quarter of last year and more recent plans to team up with fellow producers Murray Energy and Bluestone Resources to buy the bulk of Mission Coal's assets.

Contura shipped 2.8mn st of coking coal in the first quarter, up from 1mn st a year earlier, building on higher sales in the fourth quarter after its merger with Alpha Natural Resources.

Demand for U.S. coking coal has increased in the past two years as Asian and European steelmakers have looked to reduce their exposure to Australian supply risks. The widening price spread between Australian tier 1 low-volatile and lower-grade coals has also contributed to the interest in US coking coal, particularly for mills that can handle the quality variations.

Contura's average coking coal price was $123.68/st in the first quarter, down from $141.06/st a year earlier, in line with softer seaborne metallurgical coal prices in the quarter.

Coking coal sales costs averaged $92.90/st in the quarter, up from $80.45/st in the same period last year, driven by the increased use of purchased coal, which added approximately $2/st to costs, and production issues at the Marfork operations. The firm also incurred higher labour and maintenance costs in the quarter.

The temporary and partial idling of Central Appalachia (CAPP) thermal coal mines affected operations in the first quarter but these issues have been addressed, the company said.

Contura has maintained its 2019 coking coal production guidance at 12.8mn st, with 61pc of this committed at an average price of $125.68/st and 17pc committed at various index-linked prices. But the higher costs from the first quarter and higher expenditure on increased coal purchases, labour, supplies and maintenance have pushed up the company's cost guidance for CAPP coking coal sales to $83-87/st from $79-83/st previously.