Rhino Resource Partners LP

Hopedale Mining LLC was established in 2005 by reopening a coal mine near Hopedale, Ohio, that had been in operation from 1959 to 1987. “The original mine closed after losing their contract with a Cleveland-based power company,” explains Bruce Hann, vice president and general manager. “Clean air regulations were tightening, and in many cases required a cleaner product than the local mines could deliver. Since then, scrubbers on many of the power plants in the area gave new life to medium sulfur coal again.”

The mine itself still had plenty of coal in it, which encouraged Rhino Resource Partners LP to invest in it. “There is still a fairly large reserve to the north of where the old mine finished,” Hann points out. When the mine was unsealed in 2005, its condition indicated that extensive rehabilitation was required. There were six roof falls in the mine slope alone.

Removing the debris from the roof falls in the slope was difficult because of the steep incline and inability to access the material with equipment. “It was a job getting the mine back up and rehabilitating the slope,” Hann remembers. The debris was moved by hand from the mine’s upper deck to railroad cars on the lower deck that carried it out.

“We cut holes in the upper deck and loaded it into the cars,” Hann explains. “A couple had broken through the deck, so we had to load those out on the bottom before we could repair the deck and move on.”

The roof was repaired by installing arches and backfilling the voids above with lightweight concrete. “The work of the rehab team is still impressive to this day,” Hann maintains. “Prospects of extending their careers with the existing company provided a real incentive.

“Hopedale Mining is one of the better jobs in the area and provides competitive wages with above-average benefits.”

The Hopedale mining complex is approximately five miles northeast of Hopedale, Ohio. It has an estimated 18.5 million tons of proven and probable coal reserves and an estimated 19.5 million tons of non-reserve coal deposits. Its annual output is approximately 1.5 million tons.

Coal is transported to the surface by a new slope conveyor that was installed after the rehabilitation was completed. The coal is washed at the Nelms preparation plant, which is adjacent to the mine portal and on a spur of the Ohio Central Railroad. The mine is serviced by the Wheeling & Lake Erie and Ohio Central Railroads. An inline ash analyzer segregates the low ash product at the neck of the slope and the remaining coal is directed to the wash plant. The washed quality is typically 12,900 British thermal unit, 4-pound sulfur dioxide and 8 percent ash. Approximately 80 percent of the coal goes through the preparation plant.

The clean product is stored in six silos that sit on a company-owned rail spur. Most shipments are made in 10,000-ton unit trains with roughly 95 percent of the coal being shipped by rail. Unit trains can be loaded in approximately four hours.

Continuous Mining

The Hopedale mine employs continuous miners and shuttle cars as the primary mining method. “We’re one of a few mines in the state mining in the No. 6A coal seam,” Hann says. “The coal works well in a variety of boilers and goes primarily to utility customers in the Northeast to generate electricity.”

The mine operates three continuous miner sections on two 10-hour shifts per day. The crews operate on a schedule of five days on and three days off. Belt moves, power moves and equipment maintenance are performed during the idle period between the two shifts. “We run coal 359 days a year,” Hann says.

Seven crews are divided into three groups that rotate between day and afternoon shifts. “The work force exemplifies the essence of teamwork and takes full responsibility for their role, whether it is roof bolting, cutting coal or keeping the belts running,” Hann asserts. “Mining is a heavily regulated industry. We put a high emphasis on safety and doing the job right the first time.”

Safety and Longevity

The Hopedale mine did not have a lost time accident from September 2007 until August 2010. “Personnel new to mining are trained on idle shifts and introduced to company safety practices prior to being placed with production crews,” Hann explains. “We take a lot of pride in our safety record.” More than 65 percent of the work force has been with the mine operation for five years or more, and nearly 40 percent have been at the mine for more than 10 years.

“Given the size of the company and the ups and downs the mining industry has been through over the last 15 years, those numbers are pretty good,” Hann says. The mine supports local businesses to the extent that is practical for the operation. “We also actively support the local police, fire department and numerous civic organizations,” he adds.

Coal Giant

Rhino Resource Partners LP is the parent company of Hopedale Mining LLC. Rhino Resource Partners produces a

full range of steam coal that has mid- to high-Btu and contains low to medium amounts of sulfur for electric utilities across the United States. It also produces metallurgical coal, which is used by steel producers worldwide and is experiencing price increases.

Rhino has reserves in four coal basins and can supply a variety of coal types. The company has customers in the United States and abroad and is committed to safety and environmental stewardship, which its customers appreciate. Rhino says to meet these commitments it keeps its employees well-trained.

Rhino’s coal reserves are located in central and northern Appalachia, the Illinois Basin and the western bituminous region. As of March 31, 2010, Rhino controlled an estimated 285.4 million tons of proven and probable coal reserves and an estimated 122.2 million tons of non-reserve coal deposits.

As of March 31, 2010, its joint venture controlled an estimated 22.4 million tons of proven and probable premium metallurgical coal reserves and an estimated 34.3 million tons of non-reserve coal deposits. At the end of the third quarter, Rhino was on pace to produce just under 4.5 million tons, slightly less than 2009’s 4.7 million tons.

Rhino’s business plan is to continue to acquire, produce and sell reserves of steam and metallurgical coal safely, efficiently and profitably. It plans to:

• Maintain safe coal mining operations and environmental stewardship;
• Increase its production to grow its revenues and operating cash flow;
• Capitalize on the strong demand for metallurgical coal;
• Control the costs of its operations and optimize operational flexibility;
• Reduce exposure to commodity price risk through committed sales; and
• Manage financial and legacy liabilities to maintain financial flexibility.

Rhino’s strategy has been to acquire coal reserves and properties that would have long lives and could be developed at low risk and reasonable cost. “We have accomplished this through a series of property purchases and leases and by avoiding the assumption of significant legacy liabilities,” the company says.

“Our work force and parent company are our strongest assets,” Hann says. “Our parent company, Rhino Resource Partners LP, provides the necessary capital and reinvests adequately to maintain the infrastructure and equipment. A $4 million ventilation shaft and fan were put in service in 2010. Continuous mining equipment averages a rebuild every year and a half. There hasn’t been one thing the mine needed that it didn’t get.”

Keeping Lubricated

Because of the constant use and harsh mining environment, the mining equipment needs to be well-lubricated with high-quality products. “These things take a lot of oil,” Hann points out. Proper lubricants and oil analysis are critical to maintaining equipment availability.

Special dedicated double-wall skid tanks and pumping systems have been installed at the mine for specific lubrication products. Lubricant suppliers maintain the equipment. These on-site storage tanks allow the Hopedale mine to reduce maintenance cost and capital investment in lube handling equipment. The tanks allow efficient inventory management and a high level of quality control.

A supplier of lubricants to the Hopedale mine – Eni USA – has a dedicated salesperson who provides technical assistance and the latest industry trends and updated product information. Hopedale is able to deal directly with the blending plant and order product with low order limitations and without lengthy lead times. “They provide a good service,” Hann says of Eni.

The Future

The market for the Hopedale mine is expanding. “We started out with local customers mainly in Ohio, but are now shipping throughout the northeast,” Hann reports. “Customers are requesting quotes from a much greater distance than they were just a couple of years ago.”

A future development on the horizon for the company is the Leesville Reserve, which is 20 miles north of the Hopedale Mine. Leesville is a 27 million-ton reserve of No. 6 coal that the company is in the process of permitting. “The coal is of comparable quality to the 6A seam and will work well in many of the power plants within our shipping range,” Hann says.

That permit currently is in its second round of revisions with the Ohio Department of Natural Resources. Continuous mining equipment coupled with a continuous haulage system is planned for the mine. “The future looks bright for the mine, as we continue to permit new reserves and the demand for coal remains positive,” Hann concludes.

Safety and the Environment

Safety and environmental considerations are paramount for Rhino. “We are highly focused on the safety of our coal operations and work diligently to meet or exceed all safety and environmental regulations,” the company says. For 2009, Rhino’s non-fatal days lost time incidence rate was 14.9 percent lower than the industry average, the company reports. In 2009, Rhino received 17.6 percent fewer violations per inspection day than the national average, according to the Mine Safety and Health Administration (MSHA).

In March 2010, MSHA awarded Rhino’s Hopedale and Sands Hill mines in northern Appalachia with the Pacesetter for Mine Safety Award for having the lowest injury (non-fatal days lost) incident rate for 2009 in their districts. In February 2010, the Colorado Division of Reclamation, Mining and Safety and the Colorado Mining Association presented the Medium Underground Coal Mine Award to Rhino’s McClane Canyon operation in Colorado for achieving zero non-fatal days lost in 2009.

“We believe our ability to minimize lost-time injuries and mine health and safety violations will increase our operating efficiency and maintain strong employee morale,” the company asserts.

Mining Methods

Underground mines usually are operated using longwall or room and pillar mining. In longwall mining, a rotating drum is trammed mechanically across the face of the coal, and a hydraulic system supports the roof of the mine while it advances through the coal. Chain conveyors then move the loosened coal to an underground mine conveyor system for delivery to the surface.

The other underground mining method commonly used in the United States is the room and pillar mining method. In room and pillar mining, rooms are cut into the coal bed, leaving a series of pillars or columns of coal that help support the mine roof and control the flow of air. Continuous mining equipment is used to cut the coal from the mining face. Generally, the entries are driven 17 feet wide and the pillars are rectangular in shape.

As mining advances, a grid-like pattern of entries and pillars is formed. Shuttle cars transport coal to a conveyor belt for transport to the surface. When mining advances to the end of a panel, retreat mining begins. In retreat mining, as much coal as is feasible is mined from the pillars that were created in advancing the panel, allowing the roof to cave.

When retreat mining is completed to the mouth of the panel, the mined panel is abandoned. The room and pillar method is often used to mine smaller coal blocks or thin seams, and seam

recovery ranges from 35 to 70 percent. Higher seam recovery rates are applicable where retreat mining is combined with room and pillar mining. Productivity for underground mining in the United States averages 3.2 tons per employee per hour, according to the U.S. Energy Information Administration.