Published: August 4, 2021 |

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CONSOL Energy Inc. is moving ahead with investment in a new metallurgical mine that figures prominently in the Canonsburg coal producer’s efforts to diversify away from the sharply declining power-plant markets.

CONSOL had announced in early 2019 that it would move ahead with the development of the Itmann Mine in Wyoming County, West Virginia, south of its Pennsylvania Mining Complex underneath Greene and Washington counties. But the $90 million investment was put on hold when the coal markets collapsed in 2020 with the Covid-19 pandemic, although some developmental mining had continued. Tuesday, CEO Jimmy Brock announced that Itmann was back on track.

Greenlighted is the move of an existing coal preparation plant to the Itmann site that will be cost-effective and also allow CONSOL to not only process about 900,000 tons a year of its own metallurgical coal produced at Itmann but also up to 1 million more tons of third-party coal. Metallurgical coal goes to power coke plants used for steel production, compared to going to coal-fired power plants for the production of electricity.

Itmann has received permits for the mine, prep plant, and refuse area from the West Virginia Department of Environmental Protection. It expects to move the prep plant and become fully operational by the end of 2022 with an additional cost of between $65 million and $70 million. It has already spent $24 million on development.

The project will have a rate of return of around 25 percent over the life of at least 20 years.

“We are very excited about this project and its earnings and cash flow potential,” said CFO Mitesh Thakkar during CONSOL’s second-quarter conference call with analysts Tuesday.

It’s a big project for CONSOL, which like other coal producers, have seen a sharp decline in its traditional business of mining coal for electricity production. That business is likely to only continue to drop, due to sharp competition from natural gas and environmental concerns, as utilities and plant owners accelerate the retirements of coal-fired power plants.

That has led Brock and CONSOL to find other revenue sources, whether it’s moving into metallurgical coal, expanding further into the export market or finding other uses for the coal, such as coal-refuse or products like carbon-based construction products.

“This (Itmann) project is a very important step in that direction,” said CEO Jimmy Brock.

That shift has changed CONSOL’s sales mix since it became a publicly traded company with the spinout in 2017: While 82 percent of its coal went to the power market in 2017, it’s now 53 percent in the second quarter of 2021, according to data provided by the company Tuesday. Coal for industrial and metallurgical markets have grown from 18 percent in 2017 to 47 percent in the second quarter of 2021, mostly due to coal from the Pennsylvania Mining Complex that is used for industry and steel instead of power plants.

And as the domestic coal market has fallen, CONSOL has also shifted to the export markets more than it ever has before. The domestic market, primarily power plants, have fallen from 67 percent in 2017 to 45 percent today with about half of its coal production now going to the export market.

Brock said that coal would continue to go to export markets due to the company’s strategic shift toward that. This is aided by the fact that CONSOL owns a marine terminal in Baltimore, giving it an advantage that other coal companies don’t have, Brock said.

Source: Pittsburgh Business Times

About CONSOL Energy
CONSOL Energy Inc. is a Canonsburg, Pennsylvania-based producer and exporter of high-Btu bituminous thermal coal and metallurgical coal. It owns and operates some of the most productive longwall mining operations in the Northern Appalachian Basin and is developing a new metallurgical coal mine (the Itmann project) in the Central Appalachian Basin. CONSOL’s flagship operation is the Pennsylvania Mining Complex, which has the capacity to produce approximately 28.5 million tons of coal per year and is comprised of 3 large-scale underground mines: Bailey, Enlow Fork, and Harvey. The company also owns and operates the CONSOL Marine Terminal, which is located in the port of Baltimore and has a throughput capacity of approximately 15 million tons per year. In addition to the ~658 million reserve tons associated with the Pennsylvania Mining Complex and the ~21 million reserve tons associated with the Itmann project, the company also controls approximately 1.5 billion tons of greenfield thermal and metallurgical coal reserves located in the major coal-producing basins of the eastern United States.

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