SunCoke Energy, Inc. announced this week that it is executing a phased plan to scale back its Coal Mining business.
“While we plan to continue pursuing opportunities to sell all or a portion of our Coal Mining business, the challenging coal price environment has led us to make these hard decisions,” said Fritz Henderson, Chairman and Chief Executive Officer of SunCoke Energy, Inc., in a statement. "I’ve been very impressed by and thankful for the leadership and commitment of our coal team, which has consistently achieved high levels of productivity, safety and regulatory compliance during this difficult time. However, idling a significant portion of the Coal Mining business is the right step going forward and allows us to focus on our core competencies of processing and handling raw materials for industrial customers.”
SunCoke’s initial actions include immediately idling certain mines to reduce coal production from approximately 1.1 million annual tons to about 500 thousand annual tons of mid-vol coal and eliminating approximately 175 positions. In the short term, the company expects to continue to mine about 500 thousand annual tons as it pursues a sale or explores other alternatives such as potentially retaining contractors to mine on the company’s behalf or purchasing all its coal requirements to supply the Jewell Coke facility. SunCoke also plans to reduce operations at the coal preparation plant by 50 percent to further reduce costs.
SunCoke expects to incur one-time cash costs of $25 million to $35 million related to plans to downsize coal operations including:
• The previously disclosed estimated expense of approximately $10 million primarily related to contract terminations, which will be incurred primarily in fourth quarter 2014
• Anticipated employee severance and other one-time costs to idle mines of $10 million to $15 million to be recognized in fourth quarter 2014 and early 2015
• Expected capital expenditures of $5 million to $10 million in 2015 to demolish the coal preparation plant and install additional coal handling and storage to enable third-party coal purchases for the Jewell facility.