New Elk going dark - for now

IN A cost management move to help the operation’s long-term growth plans, Cline Mining has confirmed it will temporarily suspend its New Elk complex in eastern Colorado and lay off a significant portion of its workforce.
New Elk going dark - for now New Elk going dark - for now New Elk going dark - for now New Elk going dark - for now New Elk going dark - for now

The New Elk operation in Colorado. Courtesy Cline Mining.

Donna Schmidt

The company said the priorities of preserving its financial condition, along with maintaining cost efficiency and achieving sustainable sales contracts, were at the heart of the decision.

While it did not release the exact number of furloughs, officials said it would reduce staff numbers by 78% and the impacted workers had received layoff notices.

Cline anticipated the stoppage would last 60 days while the company examined “strategic alternatives” and potential financing.

It will sell coal already in its inventory during the period.

Health, vision and dental benefits will continue for eligible workers.

“While the company anticipates that the duration of the layoffs will last for approximately 60 days, the variability of market conditions and other economic factors make it impossible to project an exact personnel return date with certainty,” officials said.

“The company currently has approximately 70,000 tons of saleable coal stockpiled at New Elk and the company will retain personnel on an as-needed basis to load stockpiled product and maintain the asset for any sales made during this period.”

New Elk Coal chief operating officer David Stone, recently appointed to his seat after a long tenure with Xstrata, called the move “extremely regrettable” but said the idling was in Cline Mining’s best interests for maintaining its cash position.

“The combination of cash conservation from the temporary suspension of operations and reduction of our workforce will enable both the plan to be properly developed and implemented efficiently and effectively,” he said.

“During this time, the company has a significant stockpile of quality coal product and a workforce capable of loading the coal should a sales agreement be made.”

Cline president and chief executive officer Ken Bates echoed the words of many others saying it was market conditions that left it with what it called a prudent decision.

“[It] preserves the company's financial condition as we move toward completing the mine review and optimization process which we believe will make certain the long-term viability and [net present value] of the New Elk coal mine," Bates said.

Cline’s news comes on the heels of Patriot Coal’s announcement this week that it had filed for Chapter 11 bankruptcy protection with the US bankruptcy court. The producer’s debtor-in-possession funding was approved to allow it to maintain regular operations.

Just days ago, Canada-based Cline confirmed a 59% jump in the measured and indicated resources at New Elk.

Cline said the updated estimates for the complex in Trinidad showed 618.9 million tons of measured and indicated coal resources, a jump of 230.4Mt.

New Elk’s inferred coal resources total 104.5Mt, an increase of 81.8Mt, or a spike of 360%.

New Elk comprises the Green, Loco, Blue, Bing Canyon Upper, Red, Maxwell, Apache and Allen coal seams in a total plan area of 34,060 acres.

The complex’s seams are classified as low-sulfur, high-volatile B bituminous coal and can be marketed as a high-ash metallurgical-grade coal, a pulverized coal injection coal or a thermal coal.

Cline Mining holds significant metallurgical coal property interests in British Columbia and Colorado.

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