LEXINGTON, Ky., June 5, 2012 /PRNewswire/ -- Rhino Resource Partners LP (NYSE: RNO) ("Rhino") today is providing an operational update.
- Rhino's Hopedale operations are performing according to plan, with geological conditions generally improving.
- Mining activities at Sands Hill's surface mines are performing well as Rhino maintains a focus on efficiency and cost control.
- Rhino produced approximately 308 thousand tons of steam coal from its Northern Appalachia operations during the first two months of Q2 2012.
- Coal shipments at Rhino's Deane location have begun to increase as a major customer that had been delaying deliveries has requested additional shipments.
- Rhino's operations at its Bevins Branch mine continue to operate as planned as Rhino fulfills contracted steam coal orders from this location.
- Rhino produced approximately 82 thousand tons of met coal and 128 thousand tons of steam coal from its Central Appalachia operations during the first two months of Q2 2012. Due to high productivity, Rhino's production has outpaced sales despite reduced hours and shifts at its Central Appalachia operations.
- Rhino had approximately 181 thousand tons of met coal inventory and approximately 130 thousand tons of steam coal inventory in Central Appalachia as of May 31, 2012. Normal coal inventory levels for this region should be around 70 thousand tons of met coal and 40 thousand tons of steam coal. Rhino has taken steps to return inventories to these levels by the end of 2012.
- Rhino has temporarily idled mining operations at its Rob Fork and Tug River complexes to reduce inventory levels, primarily of met coal. This involves the temporary layoff of a number of its direct mining personnel. Rhino anticipates the temporary idling to last approximately five weeks.
- During this production curtailment period, customer shipments will continue at a normal pace based on current shipping schedules, allowing Rhino to monetize excess inventory and reduce bank borrowings.
- Based upon current contracted prices, Rhino expects to monetize approximately $18 million by year-end 2012 by reducing excess Central Appalachia inventory.
- Rhino anticipates the reduction in Central Appalachia production will have minimal impact on its 2012 projected net income and Adjusted EBITDA.
- Rhino has received $7.4 million in lease bonus payments from Chesapeake for its owned acreage in the Utica. This covers the lease of 1,232 acres at $6,000 per acre. Rhino is working to resolve title issues on about 250 remaining acres to be included in the lease.
- Gulfport Energy, the operator of Rhino's oil and gas lease interests in the Utica, has announced an agreement with MarkWest Energy to construct and operate gas gathering and processing facilities which will serve the Utica acreage being actively drilled by Gulfport Energy.
- The Castle Valley mine will ramp up to full production as the force majeure notice that began at the end of 2011 from one of its major customers has been lifted.
- Castle Valley produced approximately 148 thousand tons of steam coal during the first two months of Q2 2012.
- Rhino Eastern has begun operations at its new Eagle #3 mine. Coal sales of Eagle quality met coal continue to be relatively strong. At full capacity, Eagle #3 is expected to produce at a rate of approximately 490 thousand tons per year.
- Rhino Eastern produced approximately 64 thousand tons of met coal during the first two months of Q2 2012.
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