The Illinois Basin has higher heating value, superior transportation logistics and a more favourable operating cost and permitting regime than the Powder River and Central Appalachian Basins, Paringa said in a company presentation.
It quotes studies by Wood Mackenzie that projects total demand for Illinois Basin coal to grow from 128 million short tons in 2012 to 202.4Mt by 2020, representing a compounded annual growth rate of almost 6%.
The Illinois Basin is the fastest growing and second largest coal basin in the country, Paringa said in the strategy document.
“As demand for the lowest delivered cost coal per heating value grows due to the expanding domestic scrubbed coal-fired power market, the Illinois Basin’s low operating cost structure, high productivity and access to multiple transportation routes, has altered the dynamic in the US coal market,” the company said.
“Power plants are now increasingly ‘switching’ out of the high cost Central Appalachian and Northern Appalachian basins and into the lower cost basins, such as the Illinois Basin.
“Wood Mackenzie projects thermal coal production in Central Appalachia to decline 81.3% from an estimated 91Mt in 2012 to 17Mt by 2025 and Illinois Basin production to increase by almost 62% over the same period.”
Paringa is completing technical studies for its Buck Creek coal project in the Illinois Basin with the aim of starting mine construction in 2015.
It has also appointed James Plaisted as vice-president coal sales and marketing who will operate from the company’s Indiana office.
Paringa’s CEO David Gay said: “We are delighted with this appointment as Mr Plaisted brings enormous experience and industry contacts for the future marketing of Buck Creek’s coal.
“We are looking forward to ramping up discussions with coal-fired power utilities in light of next year’s financing negotiations and construction of the Buck Creek project.”
Within the Ohio River market surrounding the Buck Creek project, there are more than 18 power plants operated by 10 different utilities. They have traditionally received product similar to Buck Creek’s coal.
Paringa said those plants were relatively modern, highly efficient base load power plants and had some of the lowest fuel costs in the country.
