Sunoco 2011 Annual Report Download - page 19

Aggregate coke production capacity from the plants in the United States approximates 4.24 million tons per
year, while production capacity from the Vitória facility approximates 1.70 million tons per year. All of the
cokemaking plants except for the Jewell plant produce steam and/or electricity. These coke plants use a
technology with several proprietary features.
In January 2011, SunCoke Energy acquired Harold Keene Coal Co., Inc., based in Honaker, VA, for $52
million. The purchase price included a net cash payment of $38 million and contingent consideration totaling $14
million primarily related to the estimated fair value of contingent royalty payments to the seller if certain
minimum production levels are met for a period of up to 20 years. The assets acquired, which are adjacent to
SunCoke Energy’s existing mining operations, include two active underground mines and one active surface and
highwall mine currently producing between 250 and 300 thousand tons of coal annually.
In September 2011, SunCoke Energy purchased a portion of the noncontrolling interest in its Indiana Harbor
cokemaking operations for $34 million. The noncontrolling interest in the Indiana Harbor cokemaking operations
declined from 34 percent to 15 percent as a result of this transaction.
The following table sets forth information concerning cokemaking and coal mining operations:
2011 2010 2009
Production (Thousands of Tons):
Coke:
United States ............................................. 3,761 3,593 2,868
Brazil ................................................... 1,442 1,636 1,263
Metallurgical Coal ........................................... 1,364 1,104 1,134
In 2011, 76 percent of SunCoke Energy’s metallurgical coal production was converted into coke at the
Jewell plant, seven percent was converted into coke at SunCoke Energy’s other domestic coke plants and 17
percent was sold to third parties.
In late 2009, SunCoke Energy engaged a leading mining engineering firm to conduct a new and
comprehensive study to establish its metallurgical coal reserve base. Proven and probable metallurgical coal
reserves estimates were 114 and 106 million tons, respectively, at December 31, 2011 and 2010.
SunCoke Energy currently sells metallurgical coke to its three primary customers in the United States:
ArcelorMittal, U.S. Steel, and AK Steel. The current coke sales agreements contain take-or-pay provisions,
which require that the customers either take all coke production up to a specified tonnage maximum or pay the
contract price for any such coke they elect not to accept. In addition, the technology and operating fees, as well as
preferred dividends pertaining to the Brazilian cokemaking operation are payable to SunCoke Energy under long-
term contracts with a project company in which a Brazilian subsidiary of ArcelorMittal is the major shareholder.
In January 2011, SunCoke Energy and ArcelorMittal participated in court ordered mediation to resolve
ArcelorMittal’s challenges related to the prices charged for coke produced at the Jewell and Haverhill
cokemaking facilities. The parties reached commercial resolutions of these issues which included, effective
January 1, 2011, amending the Jewell coke supply agreement to eliminate the fixed coal cost adjustment factor
and increasing the operating cost and fixed fee components under both the Jewell and Haverhill agreements. The
volume terms of both agreements were also modified to remain take-or-pay through the end of each contract in
December 2020 rather than converting to “requirements” in the fourth quarter of 2012. SunCoke Energy also
entered into a confidential settlement to resolve the Indiana Harbor arbitration claims.
In March 2008, SunCoke Energy entered into a coke purchase agreement and related energy sales
agreement with AK Steel under which SunCoke Energy built, owns and operates a cokemaking facility and
associated cogeneration power plant adjacent to AK Steel’s Middletown, OH steelmaking facility. In connection
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