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Knight Hawk plans to keep 'most' Armstrong coal mines open if sale is approved

Knight Hawk Coal LLC plans to keep "most" of the mines belonging to Armstrong Energy Inc. in western Kentucky running if it wins approval from bankruptcy court to acquire St. Louis-based Armstrong, Knight Hawk CEO Steve Carter said.

In an interview Dec. 28, Carter said the addition of the Armstrong properties could push Knight Hawk’s production to 8 million tons 9 million tons in 2018. Knight Hawk typically produces just under 5 million tons annually from its stable of mines in southern Illinois.

Carter said he expects to hear perhaps as early as next week whether his company's offer to buy 51% of Armstrong will be endorsed by the court. Armstrong filed for Chapter 11 bankruptcy reorganization on Nov. 1 and has already agreed to the pending sale.

Armstrong operates the Lewis Creek, Kronos and Equality Boot mines in Ohio County, and an affiliate, Thoroughfare Mining LLC, operates the Survant mine in neighboring Muhlenberg County. Armstrong's Midway and Parkway mines in the region have not produced any coal in 2017.

Earlier this month, Armstrong issued an official layoff notice to 526 employees in western Kentucky, warning they would permanently lose their jobs on Feb. 14, 2018. Carter said he has spent much of the Christmas holiday assuring those workers that many of them will still have jobs if Knight Hawk is successful in purchasing Armstrong.

"We think it will get done," he said about the Armstrong acquisition. "We just couldn't let these potential employees be hanging."

The Armstrong mines shut down on Dec. 26, he said, "as they didn't need the production over the holidays. We're going to try to bring the Armstrong operations back as soon as we can. It will be more than half of the former production, probably less than 90%."

Carter singled out the Kronos and Survant underground mines as mines his company "intends to run. We'll cut back a little bit, just like everything else. You've got to prune the trees and let it grow."

The Armstrong mines would give Knight Hawk access to rail loadings for the first time. At present, the company ships 75% of its coal via the Lone Eagle dock on the Mississippi River near Chester, Ill.

"We're going to be more focused on the local and rail market, and we think we've got a fairly good set of contracts for three years and at fairly good prices," he said. "We're not going to focus on volume" if the Armstrong deal becomes final. "We're going to focus on efficiency and productivity. We think we can improve productivity in the underground operations, maybe get a little more equipment on the face, and how we mine."

Bob Matyi is a contributing reporter to S&P Global Platts, which, like S&P Global Market Intelligence, is owned by S&P Global Inc.