CAM Mining has experienced steady and stable growth since its 2003 inception. It plans for further expansion through acquisitions.

Formed as a result of asset acquisitions in Pike County, Ky., Central Appalachia Mining (CAM Mining) LLC has been supplying coal to large public utilities in the southeastern United States since May 2003. The company has grown through acquisitions including the purchase of AEP Kentucky Coal, a division of American Electric Power, in April 2004, and various smaller acquisitions of land and mineral properties.

The AEP Coal transaction included mining assets in southeastern Kentucky, including two surface mines and six underground mine locations, two permitted reserves, a coal-preparation plant and rail loadout facilities. Its previous owner, Ohio-based American Electric Power, is one of the largest electric utilities in the United States, serving more than 5 million customers.

“Completing the sale of AEP Coal is another key step in the execution of our plan to exit businesses that no longer fit with our strategic focus on our utility operations,” AEP President and CEO Mike Morris said in a statement. “With the sale of these assets, we’ve exited the business of mining coal to sell into the marketplace.”

“This acquisition increased CAM’s reserve base and allowed for immediate and future production areas,” CAM’s Vice President of Operations Chad Hunt adds. The AEP acquisition was ideal because of its proximity to CAM’s existing operations, he says. “Our operations were at the same area,” Hunt notes. “It was an excellent fit due to the adjoining locations – we used the same infrastructures to form one better company.”

Today, CAM operates three underground mines – known as mines 25, 28 and 30 – and five surface mines, including Threemile, Slate Branch, Hunts Branch, Marion Branch and Bevins Branch.

Rhino Energy
CAM Mining’s parent company, Rhino Energy LLC, operates in central and northern Appalachia. “Our central Appalachian operations consist of six underground mines and six surface mines in Kentucky and West Virginia, and our northern Appalachian operations consist of two underground mines in Ohio,” Rhino says.

“We market a broad range of mid- to high-Btu and low- to medium-sulfur steam coal to a diverse customer base of electric utilities in the United States, a majority of which have investment-grade credit ratings. In addition, we market metallurgical coal for use by domestic and international steel producers. We are able to serve our customers through a variety of transportation options, including multiple rail lines, truck and barge.

“We have grown through a series of strategic acquisitions and have substantially increased our coal production since our formation. These acquisitions included high-quality coal reserves and union-free operations strategically located in the Appalachian region, [which] had limited reclamation liabilities, were substantially free of other legacy liabilities and were financed without incurring a significant level of indebtedness.

“In the future, we expect to continue our strategy of acquiring attractive coal reserves, as well as selected oil and gas assets.” Rhino Energy says it produces the coal that powers the nation. “Coal is abundant and it stores immense energy,” the company says. “We provide it to the utilities that turn this energy into the electricity we use every second of the day. “Coal represents 93 percent of the country’s fossil fuel reserves and accounts for over 50 percent of the electricity generated in the United States,” it adds. “It is estimated that another 245 years’ worth of coal exists. Rhino Energy [plans] to be here every step of the way – bringing the world’s energy to the surface.”

In 2005, Rhino Energy operated about 142 million tons of proven and probable coal reserves. The company notes that approximately 93 million tons are in central Appalachia, and 48 million tons are located in northern Appalachia. According to Rhino Energy, 110 million tons of these reserves are composed of steam coal, which are used by electric utilities and industrial customers to generate electricity. The remaining 31 million tons are metallurgical coal used to produce coke, a raw material used in the steel-making process.

“We are continuously evaluating these deposits and looking for opportunities to acquire mining rights with the intent to convert a substantial portion of these non-reserve coal deposits to the proven and probable reserve category,” the company says. In 2006, Rhino Energy sold 7.9 million tons of coal – 7.5 million tons were steam coal and 0.4 million tons were metallurgical coal.

“We expect to add an additional 1 million tons of production capacity [this spring] from our new Glamorgan mine in central Appalachia and our new Hopedale mine in northern Appalachia,” the company states. “Each of these mines is in close proximity to our existing infrastructure of preparation plants and loadout facilities, thereby minimizing transportation costs for this additional production.”

Employee Safety and Training
“[CAM Mining] contributes to [our] parent company by providing safe, profitable mining operations,” Hunt explains. “CAM Mining is not highly leveraged and has the ability for significant internal expansion. CAM Mining has a very productive work force that has proven they can work safely, as proven by our safety statistics since the inception of the company.” The company’s Bevins Branch was recognized by the Kentucky Office of Mine Safety and Licensing as the safest surface mine in the Pikeville district in 2006. “Our philosophy is always to put the workers’ safety as our No. 1 priority,” Hunt states.

Hunt notes that employees go through rigorous training year-round. “Our employees are the most important assets we have,” he continues. “Each of the employees go through new-hire training, task training, annual retraining and attend weekly safety meetings held at each location by the superintendents. Our superintendents are leaders in ensuring the safety of the employees under their direction. We have a bonus program in place as an incentive for each employee to work safe.”

Doing What’s Right
CAM Mining is community-minded, Hunt notes, and one of its notable community outreach efforts is the Pikeville Scholarship Fund. The scholarship benefits students from Pikeville College, an independent liberal arts and sciences institution. Established in 2005, the scholarship provides financial support to students who live in eastern Kentucky and West Virginia. “[CAM Mining] is interested in and committed to improving the future of our region,” the company says. “We believe investing in the education of our people is a great way to improve the quality of life in the region.”

The company is a member of NCCI The Coal Institute and shares the organization’s mission “to support and financially assist public educational efforts pertaining specifically to the use and benefits of coal and the coal industry in general.” NCCI was organized by coal representatives throughout the eastern United States in 1946, and says its vision remains unchanged. “[We believe] in the importance of preserving and promoting the worldwide coal industry, enriching coal knowledge and inspiring coal support for the future,” NCCI explains.

NCCI offers programs such as:

Coal Education Development and Resource Council – This offers various coal industry educational programs at the elementary, junior high and high school levels in eastern and western Kentucky, southeastern Virginia, and southern West Virginia.

Virginia Tech Teacher Recertification – NCCI offers this alternative course in coal education to secondary school teachers in Virginia to maintain their teacher certification.

NCCI Scholarship – NCCI offers various scholarships to area schools’ departments of mining engineering and other related programs. Previous recipients have included West Virginia University, University of Kentucky, Virginia Tech, University of Missouri and University of Tennessee.

“The purpose behind the programs is to offer assistance to students who are studying to receive an education and degree in various fields associated with the coal industry,” NCCI explains. Today, NCCI says its membership extends to representatives from a variety of industries such as railroads, coal-consuming installations and utilities, as well as manufacturers of coal-burning and handling equipment and the coal-related service companies throughout the East Coast.

In addition, CAM Mining makes contributions to Belfry Football Stadium, Pikeville Domestic Violence Shelter, Big Sandy Community College, Shelby Valley Athletic Fund, and local fire departments and rescue squads. In 2006, CAM Mining also donated money, materials and other resources to Habitat for Humanity to build six houses in the Pikeville community. “We [don’t] do it for the publicity,” the company says. “It [is] just the right thing to do.”

Factors Impacting Coal Market
According to the National Mining Association (NMA), the coal industry during the mid-2000s has generally been strong. In 2005, NMA recognized CAM Mining as one of the major U.S. coal producers in the nation.

“Production in most of the eastern states increase or remained roughly the same, with the greatest increased coming from West Virginia, Kentucky, Illinois, Alabama, Ohio and Pennsylvania,” NMA states. “Total production in the East was up about 3.2 percent overall [in late 2004 and early 2005], despite modest production declines in Virginia and Indiana. “In the West, the 4.1 percent production increase came primarily from mines in Wyoming and Colorado, with production in several of the other western states remaining at about the same level or decreasing slightly.”

The organization says factors impacting the coal market include:

• “The continued tendency – driven by environmental regulation and cost – to blend or substitute lower Btu western coal from the Powder River Basin with eastern coal, resulting in rising consumption to maintain equivalent output
• “Increased demand for metallurgical coal both domestically and overseas due to higher steel demand, which has resulted in considerably higher prices and therefore greater tendency for producers to sell their metallurgical-grade steam coal on the metallurgical coal market
• “Chinese diverting coal from the export market for domestic use
• “The central Appalachian region, having worked their way through financial challenges such as reserve depletion, is still experiencing some mine permitting, labor and equipment availability challenges
• “A recent increase in U.S. coal exports due to a weak dollar and higher overseas transportation costs that have made U.S. coal more attractive in the international markets
• “The ongoing strength in capacity utilization in both coal-based and nuclear-based generation as power producers utilize their plants at even higher capacity levels.”

Further Growth
CAM Mining recently completed development of its Mine 28 (Glamorgan Seam) underground mine, located near its Rob Fork processing facility. “Mine 28 is projected to mine nearly 800,000 tons of coal annually once it reaches full capacity,” Hunt says. “This coal is a high vol coking coal that can also be marketed to our current steam coal customers. This mine is a 10-plus-year project, which will have consistent performance for a long period of time.”

Hunt says safety has always been a constant consideration in CAM’s industry. “We haven’t had any challenges so far,” he states. “We just want to mine with the best safety [practices] possible.” CAM Mining says it is open to future changes. “We try not to look too far out,” Hunt explains, noting that the company plans to remain a privately held firm for now.

“CAM Mining has sufficient reserves in eastern Kentucky to mine over 10 years and currently holds certain mining permits, which are not being exercised due to market conditions,” Hunt says. “However, with CAM Mining’s productive work force and its modern fleet of equipment, we believe we can mine and compete with other coal markets for several years. CAM Mining is aggressively pursuing other mining opportunities that might be available in the region.”