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Top Central Appalachia coal producers increase output on met coal rise

The top-producing coal mines in Central Appalachia have been increasing coal production as metallurgical coal demand has vastly improved in recent months.

The top 25 coal mines by production in the region increased output by 8.7% for the 12 months ending in the second quarter compared to the same period a year ago. Production at those mines climbed to 33.6 million tons for the yearlong period ending in the second quarter.

Second-quarter production at the same coal mines increased by less than 1% year over year.

"We've been encouraged by the rebound in coking coal prices in recent weeks," Arch Coal Inc. CEO John Eaves said on a July 27 earnings call. "Given the highly competitive cost structure of our coking coal portfolio, those marks translate into a very strong margin for us."

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Arch decreased production slightly, by about 1.3% compared to the same 12 months a year ago, at its Coal-Mac operation, the second-largest coal mine by production in the region. The company's president and COO, Paul Lang, said on the earnings call that Arch has seen increased inquiries for its coal from that mine on the seaborne thermal marketplace. The company has decreased production at its Mountaineer mine, where the company has experienced "challenging operating conditions" recently, by about 10.9% but boosted production at its Beckley Pocahontas mine 21.4% in the period.

The top-producing mine the region was the Buchanan No. 1 mine recently purchased by Coronado Coal LLC. The metallurgical coal mine increased production by 24.7% in the most recent 12-month period compared to a year ago. The company touts the Virginia mine as the "lowest-cost metallurgical mine in the U.S." Coronado also boosted production at its Toney Fork Surface, Powellton No. 1 and Lower War Eagle mines.

American Eagle, the third-largest coal mine in the region, is controlled by Blackhawk Mining LLC and boosted its production by 15.9% in the period. The company also is listed as the controller for the Samples Surface, East Mac & Nellie, North Eagle, Peerless Rachel and Blue Creek No. 1 mines.

Alpha Natural Resources Inc., which recently emerged from bankruptcy as Contura Energy Inc. was spun out of Alpha with some of its largest assets, owns six of the top-producing coal mines in Central Appalachia. The company increased production at most of those operations compared to a year ago.

"We certainly were left with legacy properties, but the fact of the matter is we were left with the best metallurgical mines in the Central [Appalachian] region with significant production," Alpha CEO David Stetson said in an interview with S&P Global Market Intelligence in May. "What we're trying to do here is stay disciplined. We're trying to focus our attention on our cost. We're trying to focus our attention on capital projects where we're trying to bring optionality back to the company."

Contura operates one of the 25 top mines in the region, the Deep 41 mine, which increased its production by about 10.5%.

Other companies with mines that significantly boosted coal production in the region during the period include Southeastern Land, LLC, System Capital Management and Alliance Resource Partners LP. Production at ERP Compliant Fuels' Pinnacle mine declined by 49.2% in the period.