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Developer of Rare New U.S. Coal Mine to Seek Listing Next Year

Australia’s Paringa Resources Ltd., which is building a rare new coal mine in western Kentucky that’ll serve power plants, is looking to raise fresh money from investors as part of a push to take market share from U.S. miners.

Paringa already has enough money to finish building the Poplar Grove underground facility it broke ground on last month. It’s seeking up to $10 million in new equity in New York as soon as January. That’s part of a longer-term approach which involves a second mine and potentially “transformative” acquisitions, Chief Executive Officer Grant Quasha said in an interview at Bloomberg headquarters in New York.

“We’re the only pure-play growth story in the U.S. thermal coal business,’’ said Quasha, the 38-year-old appointed to lead Paringa in June. “You love Australian shareholders, but over time you want to get more U.S. ones, and get more of a presence here.”

Paringa’s push into the Illinois coal basin comes as U.S. miners are recovering from the industry’s worst collapse in decades. With miners from Peabody Energy Corp. to Arch Coal Inc. back out of bankruptcy this year, U.S. coal output was up 14 percent through Sept. 9 compared with 2016, according to the Energy Information Administration. The sector has benefited from higher prices for natural gas, a competing power plant fuel, and increased demand for U.S. exports.

Paringa’s path forward may not be easy. Competition in the Illinois Basin will keep getting fiercer in the years ahead, since the region is already oversupplied with coal, said Andrew Cosgrove, an analyst at Bloomberg Intelligence. Making matters worse, a new wave of natural-gas pipelines are set to come online, bringing more of the competing fuel into Paringa’s backyard from the still-booming Marcellus and Utica shale regions.

‘War of Attrition’

“It’s going to be a war of attrition,” Cosgrove said. “Most of that gas has been landlocked in the Marcellus. It’s not going to be forever. I’d be worried about that.”

Paringa plans to start operations at Poplar Grove next August and ultimately produce about 3 million tons a year from the site. It’s a rare new thermal coal mine — as opposed to sites extracting metallurgical coal, which is used in steelmaking — in the era of President Donald Trump, who has repeatedly vowed to bring back mines. U.S. coal production fell 40 percent from 2008 to 2016, to 728 million tons, amid growing competition from gas, solar and wind power as well as tougher emissions standards at power plants.

Paringa is also planning a second mine, called Cypress, which would produce about 4 million tons. Within the next two years, the company wants to further build out operations through acquisitions, said Quasha, who previously worked as chief commercial officer of Bowie Resource Partners LLC.

‘Mid-tier Producer’

“We’d like to be a mid-tier producer, somewhere in the 7 million to 20 million ton a year range,” Quasha said.

Paringa’s journey into Kentucky has been roundabout. It held an initial public offering in 2012 in Australia. Back then, the company planned to explore for gold and graphite in Brazil, but only spent about 20 percent of its capital before stopping that approach, Quasha said. That left it with about $8 million, which it ultimately used to acquire rights to mine coal reserves in western Kentucky.

This spring, the company capitalized on warming investor sentiment for coal by raising $20 million in debt from Macquarie Bank Ltd. and $40 million in equity on the Australian Stock Exchange — enough to build out the Poplar Grove mine, Quasha said.

“Now we’re focused on delivering what we said we’d deliver to our investors, which is the first mine, on time and on budget,” Quasha said. “In a year or two, we’ll be more aggressive at looking at opportunities for deals.”
Source: Bloomberg

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