Sunoco 2010 Annual Report Download - page 19

West Virginia. SunCoke Energy is also the operator of a metallurgical coke plant in Vitória, Brazil (Vitória). An
agreement has been entered into for a cokemaking facility and associated cogeneration power plant to be built,
owned and operated by SunCoke Energy in Middletown, OH (Middletown).
In January 2011, SunCoke Energy acquired Harold Keene Coal Co., Inc., based in Honaker, VA, for
approximately $40 million including working capital. Coal reserve estimates for this acquisition total
approximately 21 million tons, and the assets acquired include two active underground mines and one active
surface and high wall mine currently producing 250,000-300,000 tons of coal annually. Current production
volumes are contracted for sale through 2011.
In the second quarter of 2010, Sunoco’s Board of Directors authorized a plan to separate Sunoco’s
metallurgical cokemaking business, which is managed by SunCoke Energy, from the remainder of Sunoco.
Through a separation from Sunoco, SunCoke Energy will be better positioned to serve its customers, the world’s
leading steel manufacturers, while also focusing on achieving its global growth potential. As a leading
independent coke producer in North America, SunCoke Energy’s customer relationships, modern cokemaking
assets and a leading proprietary technology should enable it to pursue these opportunities. The separation will
also provide SunCoke Energy independent access to capital markets to finance new domestic and international
projects. The separation is expected to be completed through a two-step process.
Aggregate coke production capacity from the plants in the United States approximates 3.67 million tons per
year, while production capacity from the Vitória facility approximates 1.7 million tons per year. The Jewell plant
can produce approximately 720 thousand tons per year, the Indiana Harbor plant can produce approximately
1.22 million tons per year, the Haverhill plant can produce approximately 1.1 million tons per year and the
Gateway plant can produce approximately 650 thousand tons per year. In addition, the Indiana Harbor plant
produces heat as a by-product of SunCoke Energy’s proprietary process that is used by a third party to produce
electricity; the Haverhill facility produces steam that is sold to Sunoco’s Chemicals business and electricity from
its associated cogeneration power plant for sale in the regional power market; and the Gateway facility produces
steam that is sold to a third party. These coke plants use a technology with several proprietary features.
Third-party investors in the Indiana Harbor cokemaking operations are currently entitled to a noncontrolling
interest amounting to 34 percent of the partnership’s net income, which declines to 10 percent by 2038.
The following table sets forth information concerning cokemaking and coal mining operations:
2010 2009 2008
Production (Thousands of Tons):
Coke:
United States ............................................. 3,593 2,868 2,626
Brazil ................................................... 1,636 1,263 1,581
Metallurgical Coal ........................................... 1,104 1,134 1,179
In 2010, 82 percent of SunCoke Energy’s metallurgical coal production was converted into coke at the
Jewell plant and 18 percent was converted into coke at the Indiana Harbor, Haverhill and Gateway plants.
In April 2010, SunCoke Energy commenced a project to expand its coal production by approximately
500,000 tons per year to an annualized rate of approximately two million tons by late 2012 (including production
from its Harold Keene Coal Co., Inc. acquisition). Capital outlays for this project are expected to total
approximately $25 million.
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. The firm is continuing its work and has
provided a preliminary report which indicates that proven and probable metallurgical coal reserves were not less
than 85 million tons at December 31, 2010. Proven and probable metallurgical coal reserves total at least 106
million tons after completion of the Harold Keene acquisition in January 2011. A final estimate of total proven
and probable reserves is expected sometime during the first half of 2011.
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