ICG Pushes Highwall Mining Business

Chief Executive Ben Hatfield concedes that ICG's ADDCAR Systems subsidiary hasn't made much money over the years. But he recently told investors that could change. ADDCAR recently redesigned its highwall mining system for the narrower confines of Appalachia's coalfields.

The new model is 45 feet long, compared with ADDCAR's 80-foot broad-bench model.

"It appears to be a very good fit," Hatfield said during a recent presentation to investors. "That business is getting a lot of strong interest."

ICG sold the first narrow-profile model in the second quarter. Its second-quarter financial report to the Securities and Exchange Commission shows why ICG has high hopes: the sale brought in $7.2 million and cost ICG approximately $4.5 million. ADDCAR followed up by increasing revenue by $2.5 million in the third quarter from highwall mining and shop services.

ICG's overall revenue declined more than 7 percent in each of those quarters.

Hatfield told investors only that the gear had a "very attractive profit margin" for ADDCAR.

Part of Hatfield's high hopes for the operation stem from a federal court decision that has raised serious doubts about the future of large-scale surface mining in Appalachia. Back in March, U.S. District Judge Chuck Chambers ruled that the U.S. Army Corps of Engineers violated federal law by issuing valley fill permits to mountaintop removal mines without adequately determining whether the environment would be harmed.

The ruling has rippled through the Eastern United States coal industry and Hatfield says it has made highwall mining more attractive.

Highwall mining is a bit of a hybrid approach to removing coal. Instead of shearing off the top of a mountain to reach a shallow seam or tunneling deep under the earth, highwall mining removes coal by digging 1,000 feet or more from the side. It's widely considered the least expensive method of coal mining because it requires fewer workers -- crews number five to eight typically -- and doesn't require ventilation, among other things.

Though numbers for highwall mining production aren't broken out, West Virginia Coal Association President Bill Raney expects that figure to grow between 5 percent and 10 percent over the next year.

In part, Raney said that's because ADDCAR and its Beckley-based rival Superior Highwall Miners Inc. have improved their equipment to enable mining of more seams in the state.

"The sophistication of the machines is improving and increasing each day," he said.

And then there's the Chambers decision.

The industry fears the ruling will make it difficult -- maybe even impossible -- to get permits for new mountaintop removal mines in West Virginia. And like clockwork, Wall Street analysts ask the likes of International Coal and Massey Energy every quarter about plans for dealing with the decision if it's upheld on appeal.

Highwall mining, on the other hand, requires the removal of far less surface material and much of it can be used to rebuild the mountainside later.

"In some respects, it's kind of an alternative to large-scale surface mining," Hatfield said.