Hallador idles Prosperity mine, production shifted to Oaktown

Houston (Platts)--3 Sep 2014 500 pm EDT/2100 GMT

Illinois Basin producer Hallador Energy has idled the Prosperity mine its wholly-owned subsidiary Sunrise Coal recently acquired from Vectren Fuels, according to a regulatory filing Wednesday.

In an investor presentation included in a filing made with the US Securities and Exchange Commission, Hallador said Prosperity, an underground mine in Pike County, Indiana, was idled August 29, the same day Sunrise completed its $320 million purchase of Vectren Fuels.

A request for comment from the Denver-based Hallador, including messages left for company CEO Brent Bilsland, were not returned. A market source familiar with the mine said it had been shut.

Hallador is scheduled to publicly discuss Sunrise's purchase of Vectren Fuels in a live webcast at 2 pm EDT Thursday.

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According to the presentation included in the SEC filing, some of Prosperity's equipment will be removed and installed in the nearby Oaktown No. 2 mine in September, while additional equipment will be moved to the Oaktown No. 1 mine later in the fall. Both Oaktown mines were owned by Vectren Fuels.

All three mines are located in southern Indiana.

In addition, existing inventory at Prosperity will be loaded out through November, and any remaining Prosperity contracts will be fulfilled from a newly joined Carlisle/Oaktown complex, according to the presentation.

The complex combines Sunrise's second-largest asset (Carlisle) with the largest asset (Oaktown No. 1) of the former Vectren Fuels, creating a roughly 122 million st contiguous reserve in southern Indiana.

"It will be interesting to see how much they expand Oaktown operations," said John Hanou, a coal consultant and author of a 20-year price and demand forecast for the Illinois Basin. Hanou said production from the Carlisle/Oaktown complex could climb to 7-8 million st/year.

Hanou said the closure of Prosperity is not a surprise, as it was known to have high production costs due to troubling geology. Vectren Corp., the parent company of Vectren Fuels, identified poor mining conditions at the mine in its first quarter SEC filing.

Prosperity produced 1.8 million st in 2013, and 2.1 million st in 2012, according to US Mine Safety and Health Administration data. Production in 2011 totaled 2.5 million st.

Sunrise's largest asset is the roughly 78 million st War Eagle (formerly Russellville) reserve in Lawrence County, Illinois. Neighboring the Carlisle/Oaktown complex, the combined reserves would measure roughly 230 million st, according to the presentation.

--Andrew Moore,
--Edited by Kevin Saville,

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