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Executives

James Ketron - Vice President, Secretary and General Counsel

Joseph Czul - President - Logan & Kanawha

Coy K. Lane - Chief Operating Officer and Senior Vice President

Peter T. Socha - Chairman, Chief Executive Officer and President

Elizabeth M. Cook - Director of Investor Relations

Samuel M. Hopkins - Principal Financial Officer, Chief Accounting Officer and Vice President

Analysts

Lance Ettus - Mortar Rock Capital Management

David Olkovetsky

Michael Goldenberg - Luminus Management, LLC

J. Christopher Haberlin - Davenport & Company, LLC, Research Division

Justine Fisher - Goldman Sachs Group Inc., Research Division

David E. Beard - Iberia Capital Partners, Research Division

Brian D. Gamble - Simmons & Company International, Research Division

Shneur Z. Gershuni - UBS Investment Bank, Research Division

James River Coal (JRCC) Q3 2011 Earnings Call November 8, 2011 11:00 AM ET

Operator

Good day, ladies and gentlemen, and welcome to the James River Coal Co. Third Quarter Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Beth Cook, Director of Investor Relations. Please go ahead.

Elizabeth M. Cook

Thanks, Stephanie, and good morning. Welcome to James River Coal Co.'s Third Quarter Earnings Call. We released our earnings this morning and our current release and presentation are posted on our website, and were furnished to the SEC on a Form 8-K. With me on the call today are Peter Socha, Chairman and Chief Executive Officer; C.K. Lane, Senior Vice President and Chief Operating Officer; Sam Hopkins, Vice President and Chief Accounting Officer; Joe Czul, President of Logan & Kanawha; and Jim Ketron, Vice President and General Counsel.

Before we begin this morning, I need to remind you that this call will contain forward-looking statements, and these statements should be considered along with the risk factors that we note at the end of our press release, as well as in our annual report and on Form 10-K and other SEC filings. Now I'll turn the call over to Peter.

Peter T. Socha

Okay. Thank you, Beth, and good morning, everyone. Thanks for joining us. We're going to go through our slides fairly quickly. It's a short deck, and then we'll get right into the Q&A. It was a fairly uneventful quarter here. The mines were doing pretty well. We were still cleaning up from the Jellico flood. But by and large, the mines did well, and we did sell some coal, as we'll talk about in a few minutes. We did miss a couple of ships. We thought that we knew stress when we missed a couple of big trains of thermal coal. But now, when you miss ships, it's 20 times that much. So we're learning to deal with that, but those shipments are back to normal. They're not market related. It was just a delay in price fixing on that, and so the ships got pushed out.

We did sell some coal during the quarter. You could see that we sold 2.4 million tons for 2012 delivery. In total, we sold about 4.2 million tons. What we have left in Central App for the Central App coal in 2012, the vast majority of that is specialty coal, it's high-dollar coal. It's either met coal, stoker or PCI. And actually, if you exclude the West Virginia met coal from the equation and just look in the Eastern Kentucky operations, the majority of the coal that we have left to sell is still met coal, stoker or PCI. The lowest price of which we've gotten for those coals has been in the 90s. So we're feeling pretty good about next year and our pricing for next year right now with what we have left to sell.

The integration of Logan & Kanawha and IRP is done. It's pretty much done. I don't think we've had any conversations recently on any integration issues or synergies or anything like that. We're just functioning as one company, and I'm very happy about that. We are continuing to maintain, we're very focused on our cash balance. As we know, many of you are -- and our liquidity. We think that the next year or so could be, as a result of regulatory issues, the market could stay on the softer side. And so we want to make sure that we have a strong balance sheet when the market does turn back up.

One thing we didn't put on here, you'll notice, that there was some tax changes. Every third quarter, we true-up on taxes. We have NOL complications and we have alternative minimum tax complications and percent depletion. We will be filing the 10-Q this afternoon. It has full notes in it on that. And if you still have any questions, just give Sam a call tomorrow morning. And with that, I'll turn it to C.K.

Coy K. Lane

Thanks, Peter. Just to cover a few things on safety. Our NFDL rate, which is our non-fatal days lost, was 1.44 year-to-date. That's well below the national average, and it's also below our 2010 rates. So we're very pleased with that. Bevin's Branch won the MSHA National Mining Association's Sentinels of Safety award for a large prep plant. Tan Trough also won for the safest large underground mine in MSHA District 7. We have added a second continuous miner with the proximity detection at our McCoy operation, and we're pleased with the way that miners operate. We completed 90 seals at 2 different mines, trying to reduce the size of the mines and just the regulatory footprint. We will continue to try to make the mines smaller in size just to reduce the cost it takes to maintain large outby areas, and we'll continue this project into the fourth quarter.

In Central App, as Peter mentioned, we did reopen the Jellico Mine after the flood. One section opened in July 22 and the second section opened on August 30. We did have substantial cost at Jellico in the third quarter reopening the mine. The bright spot on this is the coal's been shipped into the PCI market. We have a replacement mine, Miniard Branch, to open in the fourth quarter at our Bledsoe operations. That will be an underground mine. Pound Mill is a replacement underground mine in the fourth quarter for the Blue Diamond operations. And at our Leeco operations, Mine #88 ramped up into full production in the third quarter.

Midwest, pleased to announce that our Log Creek prep plant began processing coal in September. That's a 600 ton an hour plant, saves us on trucking and improves our recovery. It's a very efficient plant, very pleased with the plant. Also, we are working on our Log Creek rail load-out, and we hope to have that up and running in November. As far as the Midwest, we are continuing to run the operations at a reduced rate. This is to meet the customer demand and control the inventory, and that's one of the reasons we are excited about the rail load-out at Log Creek because that will expand our customer base. And with that, I'll turn it back over to you, Peter.

Peter T. Socha

Okay. Thanks, C.K. Mr. Czul?

Joseph Czul

Sure. On our coking coal, we are in the middle of negotiating our 2012 domestic commitments, and prices are up from 2011. Most of the deals will be 12 months in length. On the international side, prices have come off pretty hard from the second quarter settlements. But we do think that, I guess, what we're saying is, "The easing is easing". So most of the market reduction has been seen, and we think it's starting to level off. We're particularly seeing that in the domestic settlements, we're sort of going to create a floor, in our view. On the -- that said, on the international side, 12 months ago, most, if not all of our -- so most of our settlements were for 12-month transactions, and that's going to be almost all quarterly basis in 2012. So we expect to settle the January to March prices in early to mid-December. Peter?

Peter T. Socha

Thank you, Jeff. On the thermal coal side, as you could see in our contract table in the press release, we did conclude several new contracts, both CAPP and Midwest, including a long-term -- longer-term contract, and so we're pleased to put those to bed. We are shipping some Indiana coal to the export market this quarter, which we were very pleased to do. It's the first time we've done that. We've also started this quarter -- I think it was this quarter. Joe, was it October or September, the PCI?

Joseph Czul

Well, actually, we...

Peter T. Socha

That's late September.

Joseph Czul

We did some overseas in late September. We sold some PCI even in -- to the tail end delivery early Q3.

Peter T. Socha

It sort of crossed in the September, October timeframe. But we shipped some PCI from the legacy James River -- what I'll call legacy James River assets in Eastern Kentucky to the international PCI market, and so we're very pleased with that. The stoker market does remain firm. The prices are in the 90s. So we're pleased with that. On the international side, we just got -- Joe and I just got back from Europe a week or so ago, and the U.S. really does seem to be moving from a swing-supplier status to a base-supplier status. A lot of interest there for 2012, and I'll talk about 2012 on the next slide, but a lot of interest there for 2012 coal. And we'll be going back over there, probably right after the first of the year. We do like how our coal is received there. We've shipped it over there for the last several years, off and on, and gotten good reception.

The next slide, which is the clean dark spread, and I should have noted on here it was Germany. When I was on a panel of the coal trends in Madrid, a gentleman from Barclays put this up there and I followed it. I saw the clean dark spread sort of tangentially, haven't really seen the trend, haven't followed the trend until he put the slide up there. And I think it indicates what coal burn will be doing during the calendar year 2012 in Northern Europe anyway. So it looks like it will be a very good year for coal in Europe.

And then the last slide is our conferences. We've got Dahlman Rose coming up next week and got Sterne Agee, and this was a last-minute one, just came up last week. Sterne Agee with Mike Dudas in Philadelphia next Monday has got a one-on-one conference. So I'm sure I'll be seeing some of you there. UBS, with Shneur in Boston, his Annual Coal Conference up there, again, a one-on-one conference. And in the spring, we've got Simmons and Brean Murray, which will both be in the first week of March, which is around the time we report. So I think we'll be able to attend, but I'm not certain on that. And then we've got Raymond James coming up a little bit later in March.

And with that, Stephanie, we would be pleased to answer questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Michael Dudas from Sterne Capital Agee.

Michael S. Dudas

There's Capital now with the Agee. First question, maybe relative to the appetite for your met coals in India -- since you do have a better insight than maybe most, could you maybe discuss that? And second question, I have 3. And second would be when you look at 2012 and the -- your indications on European thermal and met markets, so how much do you think James River will be exporting throughout all its basins in 2012?

Peter T. Socha

Joe?

Joseph Czul

Sure. Basically, the appetite for our coal in India is quite firm. We've grown our business from call it 300,000 tons, 6 or 7 years ago to upwards over 1 million tons. This year, really don't see a whole lot of softness there. I think some of the growth projections are perhaps a little bit ambitious that you see in some publications or some conferences, but our customers are growing their business, their expansions of existing plant. That's where the growth is the most solid, and our -- so we like it. In terms of 2012, really don't have those figures handy. I guess I'd say that it'll be -- we expect more or less the same as 2011.

Peter T. Socha

Yes, Mike, I think, my view is in 2012, we'll probably export around 500,000 tons of thermal. Some of that's already booked. Some of it, we booked during the most recent contracting period.

Michael S. Dudas

And that's including your Illinois coal or the Indiana coal?

Peter T. Socha

No, this is just Central App.

Michael S. Dudas

Okay. And my third question, you -- can you talk a little bit about your further outlook for the U.S. thermal market? I'm assuming it's dedicated relative to what the utility customers are not doing in the market given what the regulatory issues are. Can you give a sense of how long that might drag out? And if 2012, at least, right now, what you think it's going to be? How is that going to affect as you're going through budgeting your production levels of thermal CAPP coal into 2012?

Peter T. Socha

Well, we don't -- we really don't differate too much in the production schedules that much. Obviously, we're trying to produce more of the high-value coal and less of the low-value coal. On the market, I wish I had some clarity. I think we would have much more clarity today. But for CSAPR, which came out in, I guess, early July and some of the other regulatory things coming out of the EPA. Inventories are coming down, the demand, the coal burn is okay. It's kind of stabilized at a lower level, so it's okay, and the supply is clearly coming off. I mean, if you just trend line MSHA-reported numbers for public and private coal companies in Central Appalachia, supply is coming off. So my view has been and continues to be, yes, demand may be falling marginally, supply is falling by a greater amount. And you have the outlet of export coal, whether it's going to Europe or India or wherever. And so you've got inventories that are coming down. So the market should be clearing sometime in the first half of next year. Now what CSAPR did -- CSAPR, for those of you -- someone on the phone may not be familiar with, it's Cross-State Air Pollution Rule issued by the EPA, July 6. It caused so many utilities to just freeze because the effective date on the regulation is January 1. And so a lot of these utilities are deferring their purchase decisions. Normally, you would see much more of purchasing decisions right now or within the last 4 to 6 weeks then we have this year, and it's almost entirely due to CSAPR. I mean, for what it's worth, I think CSAPR gets tossed out by the court, but that's a whole separate conversation. And so we'll wait and see sort of what happens with CSAPR and what happens with the reg -- the utilities buying coal. In general, we have 1 or 2 exceptions. But in general, the utilities that we deal with, if CSAPR is not effective next year, then the utilities probably need a little bit of coal. If CSAPR is effective on January 1 and nothing happens in the court or the EPA doesn't make another revision as they've already done once, then a lot of utilities are long coal. They have a little bit too much coal. So it will be interesting to see what happens in the next, I think, 2 to 3 months. Then we'll make our call from that. I mean, we're almost doing 2 different budgets, as you can appreciate. One is that the utilities are back in the coal market, and one is that they're not, and so that's what we have to do.

Michael S. Dudas

And just one final follow-up for C.K. Are you noticing anything from the labor pool or your anecdotal standpoint of some of those sections and mines coming off-line?

Coy K. Lane

Right now, in the labor pool, the Midwest, we're in pretty good shape there. In Indiana, in Central App, we've got some shortages in some key folks. But in general, we have a pretty good labor pool there. West Virginia, in and around the Logan area, where our operations are at, labors' very tight there -- a lot of competition for the labor there. So I would say Midwest and Kentucky are in pretty good shape and tight labor in Southern West Virginia.

Operator

Our next question comes from Shneur Gershuni.

Shneur Z. Gershuni - UBS Investment Bank, Research Division

Before I get to my questions, I just wanted to confirm something about the slippage of boats into the fourth quarter. Does that alter your capacity of what you can ship in this fourth quarter based on what you planned? Or can you still ship planned tonnage plus these 2 shipless slip boats?

Peter T. Socha

Yes, we can still ship planned tonnage plus the slip boats.

Shneur Z. Gershuni - UBS Investment Bank, Research Division

Okay, great. Just a question for you, Peter. From a cost structure perspective, things are kind of a little murky trying to parse out what your legacy costs are from an operational standpoint versus the trading business. Historically, you have not sold coal or planned to sell cool at a loss and so forth, but the numbers sort of shake out that way. But obviously, there's a difference between your legacy operation and so forth. Can you sort of talk about the kind of the margins we should be thinking about for the business that you booked for next year? Obviously, there -- any clarity I guess on the cost side that would allow us to figure out some of the margins would be certainly helpful.

Peter T. Socha

Well, yes, I mean, the utility -- if the cost in legacy James River, and this is true from last quarter, and it's also true this quarter. The cost within legacy James River really haven't moved materially. So what you're looking at is the impact of either the met coal that is mined or the met coal that is purchased. And there's a margin -- the way that Joe and L&K do things, there's a margin inherent in what they do. So I wish I had done a better job explaining that, explaining that and explaining DD&A on the last call, but we're capturing margin on those tons. So we -- were we to lose those tons, the cost number that you look at would go down, and so you'd be all happy. But meanwhile, I've lost a lot of margin, and so I'm unhappy on doing it that way. But the cost within the legacy of James River assets are not really not materially different. And the margin on the tons that we booked this past quarter, they're okay. They're okay. They're not great, but they're okay. But knowing that I've got most of my specialty coals left to go, by the time I blend those in to the average sales price for next year, I think we'll still be okay.

Shneur Z. Gershuni - UBS Investment Bank, Research Division

And just as a follow-up to that, and thank you for the clarity, but when you say that legacy production costs have not changed much, but I think it's fair to say that the average selling price of those tons is lower. So would you theoretically see a decline technically in costs related to the royalties associated with it on...

Peter T. Socha

Yes, that's a fair comment. I mean you have other -- I can see C.K. on the ceiling now -- I mean, you have other costs that have gone up. Probably the biggest regulatory impact we're seeing now is on lost production time because they'll go in -- and this is not unique to us, this is every company in the -- every mining company in the U.S., particularly in the Appalachians. And that is just -- MSHA's now going in and shutting down for longer periods of time, while you clean up roof falls or you do other things. So your productivity, your cost to productivity is changing.

Shneur Z. Gershuni - UBS Investment Bank, Research Division

And maybe as a follow on to that comment, Peter or C.K., if you can sort of talk about MSHA in general. Obviously, it's been at a heightened level since the UBD accident 1.5 years ago. Quarter-to-quarter, over the last 6 months, has it gotten incrementally worse? Or is it kind of at the same heightened level? And are you getting better at responding to some of their requests that they didn't use to make?

Peter T. Socha

Well, I think we're definitely getting better, and you just adjust. And this is true within MSHA because things that come out of the headquarters of MSHA and Arlington, it takes a while for the field to adjust to what they want. But getting better or getting worse, that's a no-win question for us. It's just something we adjust to everyday. C.K.?

Coy K. Lane

I would agree. I mean, I think what you see is you continually get more regulations that are coming up and coming out -- the proximity devices on the continuous miners. There's going to be some regulations on dust, change in policy, as Peter mentioned on cleaning up roof falls. So it continues, you get new regulations, and you get adjusted to the old ones and then have to work through the new ones that are coming out.

Shneur Z. Gershuni - UBS Investment Bank, Research Division

Okay. And one last final question, which is a follow-up to Mike's question, you sort of -- Peter, you mentioned that there's kind of 2 different scenarios that happens. If CSAPR gets punted down the road, are we looking at a scenario like a bunch -- a herd of elephants trying to run through the door to get coal? Inventories are below normal and so forth?

Peter T. Socha

Yes, you'd have to know what happens with CSAPR. If CSAPR is delayed by 90 days, is it delayed by a year? Does the EPA just fundamentally restructure CSAPR, or does the court throw it back to EPA and say that this violates several different provisions of the EPA? But I just don't know -- it's hard to answer that hypothetical when I don't know what's going to happen to CSAPR. I've gone through everything on CSAPR. I feel pretty confident in my view on it right now. But I don't know what the court will do.

Operator

Our next question comes from Justine Fisher from Goldman Sachs.

Justine Fisher - Goldman Sachs Group Inc., Research Division

So the first question I have is a follow-up to Schneer's question on cost. So the last cost that we have for James River x IRP for CAPP is, I think, $76.82 in the first quarter of this year. So if costs have not really moved -- and for the industry, they seem to have gone up, then your thermal costs are probably in the high-70s right now. Is that around the right ballpark?

Peter T. Socha

They're in the 70s. I don't know. I mean, they came down, they edged off a little bit in Q2, but they kind of stayed where they are for the year. So we're okay with that. I'm not going to characterize it as high-70s, low-70s or mid-70s, but they haven't changed. My point is, and I really did -- quite honestly, I did a crappy job explaining the impact of the purchased coal and the impact of the -- or the brokered coal or whatever we want to call it, blending coal, and the met coal on the last call and how that impacts our costs. There is a margin attached to it. There's a pretty significant margin attached to it. Were we to lose that, that would materially hurt us.

Justine Fisher - Goldman Sachs Group Inc., Research Division

Right, but if so we break your segments out into steam and met, and then obviously on the met side, you've got some of your purchased coal on the higher quality stuff -- but just steam, steam is all produced, right?

Peter T. Socha

Yes, that's right.

Justine Fisher - Goldman Sachs Group Inc., Research Division

Okay. And then also, as far as what is unpriced for next year, you said that you still have the PCI and the stoker. Would you include that in the met segment?

Peter T. Socha

Well, we don't report a met segment.

Justine Fisher - Goldman Sachs Group Inc., Research Division

Well, but you do report like average met pricing and average met tons?

Peter T. Socha

Yes, I guess we would. Well, stoker, we would not, but the met and the PCI would be, but stoker is not. Stoker is reported out as thermal.

Justine Fisher - Goldman Sachs Group Inc., Research Division

Okay. And you haven't given guidance as to what the breakdown of types of met you expect to sell even if it's ballpark between higher-quality PCI, et cetera?

Peter T. Socha

No, we only give guidance twice a year. You know that.

Justine Fisher - Goldman Sachs Group Inc., Research Division

Right, okay. And then you said that some of your thermal tonnage that has been booked already is export tons. So is that basically implying that the export tonnage that you guys have sent abroad on the CAPP thermal side has netted back to the mine, basically, in the low-80s because your price tonnages is around...

Peter T. Socha

It's netted back at a decent price. I wouldn't say in the low-80s. It's netted back. There's a little bit. We'll look at the breakdown here. Yes, and within the $1.1 million that we sold for next year, there's a marginal, I mean, a very, very small amount of stoker coal in there, and the rest of it is thermal and the thermal's at 3 or 4 different price levels.

Justine Fisher - Goldman Sachs Group Inc., Research Division

Okay. Where are you seeing stoker coal pricing now, you said the 90s?

Peter T. Socha

Stoker coal's in the 90s, yes.

Justine Fisher - Goldman Sachs Group Inc., Research Division

Okay. And then just on the CapEx front, I know you're probably still working through a 2012 budget. But so this year, it's probably still going to be around the $140 million range?

Peter T. Socha

I'm not going to update guidance, Justine. I know what you're saying, but I don't want to update guidance. Now that we have all these met trip ships out there, I'm not going to -- I'm definitely not going to update that.

Justine Fisher - Goldman Sachs Group Inc., Research Division

Okay. Can you confirm whether you've given just a maintenance number for the combined companies now?

Peter T. Socha

Sam, are you with me? Are you there?

Samuel M. Hopkins

Yes, I'm here.

Peter T. Socha

Have we given a maintenance number for the combined company?

Samuel M. Hopkins

I don't know that we've given a maintenance number out.

Peter T. Socha

We'll go back and look, Justine. If we have, we'll call you back.

Operator

Our next question comes from Brian Gamble from Simmons & Company.

Brian D. Gamble - Simmons & Company International, Research Division

First of all, I want to clarify one of your comments you made to Shneur. If you're not happy, Peter, we're not happy. You can feel a little bit more comfortable there.

Peter T. Socha

I know Shneur too well.

Brian D. Gamble - Simmons & Company International, Research Division

On the boats that you -- that are slipping, you mentioned that you can roll those in with the rest of your shipments. Any comments on whether those boats were produced or purchased tons and how that -- what I'm trying to get at is...

Peter T. Socha

They're always a combo. I think, almost every -- Joe, correct me if I'm wrong, but almost every ship we have is a combo.

Joseph Czul

That's right, every -- as a general rule, that's how I -- we build our export blends as a combination of produced and purchased coal.

Brian D. Gamble - Simmons & Company International, Research Division

Okay. I was trying to get to an apples-to-apples number with last quarter if you had actually gotten those boats out from a cost standpoint. Obviously, you got a benefit on the cost line as you mentioned by not shipping those boats. Do you think cost quarter-on-quarter would have been comparable if those boats had gone up?

Peter T. Socha

Probably, yes. I mean, we're kind of running steady-state, truth be told, except for a mine here or a mine there, we're kind of running steady-state. And there's some -- as C.K. mentioned, there are MSHA issues every day that we deal with. Some are worse than others, but we're running as a combined company. We're running steady-state.

James Ketron

Moving to the, I guess, your comments on the seals. I know that C.K. is walking through that. Is that a dramatic cost benefit to next year with your Q3 and Q4 plans to reduce the mine size, and therefore reduce the regulatory footprint? I mean, is -- or is that just a kind of a maintain your current cost levels sort of deal for next year? How impactful could that be?

Peter T. Socha

Well, I think everything we do, we're trying to maintain our current cost level. I mean, as you and others have pointed out, others are having rising costs. In some cases, like on the seals, we're incurring the costs to build those seals today with the hope that in reducing the footprint next year, we have less mine to maintain, less mine to -- that MSHA can put a spotlight on. C.K., what do you think?

Coy K. Lane

I would think that's the correct statement, Peter. I mean, we're just trying to reduce the size that we don't have to maintain as much, but you still have -- it helps on that just to reduce, and like you said, the spotlight that you can look at.

Peter T. Socha

Well, all in, Brian, I think your statement is correct that it should help on costs next year. But there are just so many other factors that go into cost. But reducing the regulatory footprint or reducing the spotlight, whichever the analogy you choose to look at, should help on costs, without a doubt.

Brian D. Gamble - Simmons & Company International, Research Division

And then in the Midwest, same sort of question. The Midwest seemed to have a pretty consistent quarter. Nothing significantly jumps out of me as a one-off, but the cost did tick up decently quarter-on-quarter.

Peter T. Socha

They've done a great -- given the rate of production that they're running at right now, they've done a phenomenal job in managing their costs. This has not changed within the last year or so, certainly, not since the last call. The Midwest is all about base load power generation. Indiana, Southern Illinois, Ohio -- within the current economy, their base load power generation is just in the dumper. And so when that ticks up, you'll see Indiana tick up. So we're not at all unhappy with what they have done on costs.

Brian D. Gamble - Simmons & Company International, Research Division

And the last thing for me, I think your comment about your opinion that CSAPR will get thrown out, I think, are -- needs a little more delving into. Can you give us your reasons as to why you think that will occur because clearly...

Peter T. Socha

Yes, I saw your report. What did you have? 39 gigawatts being shutdown or something?

Brian D. Gamble - Simmons & Company International, Research Division

Yes, in the mid-30s. Yes, that's right.

Peter T. Socha

We just look at it a little bit differently. We look at it more from -- and this won't surprise anybody who was with us through the Chamber's process. We just looked at it from the legal standpoint and what are the odds that it survives in the court process? Because right now, it's in the court process in the Circuit Court of Appeals in D.C. And so what I did is I read almost every pleading in the file, and it's a total of -- the total of what we've gone through is probably 2,000 pages. Of the 2,000 pages, 500 are substantive and 50 are what I would call decisive. So we looked at every pleading, either from the EPA or from plaintiffs suing the EPA or asking the court to review the process, and so we got a good sense of what the arguments were going to be. And then we looked at within that court, within the Circuit Court of Appeals in Washington D.C., this falls under what's called the Administrative Procedures Act, and the test there is what's called arbitrary and capricious, which is the exact test that the Chamber's court process was part of. But within the administrative procedures, you have to look at what's called arbitrary and capricious, and we looked at other decisions within that court. Again, we didn't look at the Atlanta court. We didn't look at Richmond. We didn't look at San Francisco or Cincinnati. We looked at Washington, and I looked for other cases that would be substantially similar to this, and there were several. There were 3 or 4 that we looked at that. And then we also looked at Supreme Court cases, which kind of defines what the Court of Appeals needs to look at when they're looking at it. And if I could pick sort of 3 or 4 documents for you to read and draw your own conclusions, it would be a couple of things. One would be the lawsuit filed by the National Mining Association, and you can get it from the court. I don't know, NMA might give it to you, but read that. And in particular, pay attention to the communications between the EPA and FERC, okay? Forget the legal argument of the NMA lawsuit, it's okay. It's not -- probably not as tight as I would want it to be, but it's okay. But pay particular attention to the communications that came out in August -- in late July and in August between FERC and the EPA. Because what that does is that shows how much analysis went into this whole thing. And then I would say get a copy of the Appeals Court decision in the business roundtable versus the SEC. And I think it's Pages 6 and 7, but I'm not sure. It's either 6 and 7, or 7 and 8, and read the analysis section there. And then get a copy of the U.S. Supreme Court decision from 1983 called State Farm. And State Farm really lays out what the Supreme Court is looking for and what they're looking for is complete analysis, a complete record -- mainly those 2 things, and then coordination with all the major parties. And then go back and reread the NMA lawsuit and the communications between FERC. So it really appears as though the modeling left something to be desired. Down in Texas, I'll give you an example. In Texas, renewables, ERCOT, which is the -- which is your MSO down there, you -- they have roughly 9,000 megawatts, 9 gigawatts of renewable power. ERCOT assumes that renewable power is going to be available about 8% of the time. That seems reasonable. Wind power, solar, whatever. It's going to be available about 8% of the time. The rest it will not be available. In the EPA models, they assume it's available 100% of the time. That makes no sense, right? Wisconsin, very similar situation in Wisconsin. So if you read all those things, then call me up, and we'll talk about it. But I think that it will either had-- and then lastly, let me add one note in there, and that is look at the comments from Mike Morris, Chairman of AEP. They were either last week or the week before, and he talked about negotiations with the EPA, recent negotiations. So I think it either does -- they either had a major modification, or they have some delay from the court or the court just kicks it back to the EPA and says, "You need to relook at this." But it will be interesting, and I'm not a lawyer, but I've read everything in this case, and I feel pretty confident that it fits within the arbitrary and capricious definition.

Operator

Our next question comes from Brett Levy from Jefferies & Co.

David Olkovetsky

Peter, it's actually Dave Olkovetsky for Brett. Just a couple questions here. First -- the first one relates to potential acquisitions. Are you still looking at buying up some reserves now that IRP and L&K have been integrated? And how high on your list, your priority list would the increasing reserves be?

Peter T. Socha

Yes, right now, that cash balance is really important to me. So we're looking at things. We've looked at things recently. Some big, some small, but that cash balance is pretty important to me that we keep that. That's our nest egg. As one of our miners call it, but that's our nest egg.

David Olkovetsky

So what do you feel is your minimum liquidity amount that you'd want as far as...

Peter T. Socha

Whatever it was this morning.

David Olkovetsky

Okay. Got it. Well, that sort of answers my next question, which was...

Peter T. Socha

I mean, we're looking at things. I don't know. At any given time, we're always looking at 3 or 4 things. But given what's happened in the capital markets, given what's happened with the EPA and with utility -- sort of the freezing of the market, of the utility buying market, I think it's best that we just stand pat with what we've got, and I like our assets and I like our people.

David Olkovetsky

Got it. Well, how do you feel about potentially buying back some of your equity or bond at the level that they're at now?

Peter T. Socha

You're asking some of Brett's question in there. Let me separate between the equity and the bonds. We're in the coal business, because I get this question a lot. We're in the coal business and our equity trades on coal prices. It doesn't trade on earnings per share, earnings and like that, and that's true in most commodities. So you can go out and you could spend a lot of money buying back in your stock. And at the end of the day, if coal prices are $85, in 6 months from now, our stock will be much higher than where it is today. If coal prices are $90, our stock would be materially higher than where it is today. That's just how we trade. So I like my cash balance -- the bonds, I don't intend to put a bid under the bond. That's not my current intention.

Operator

Our next question comes from Chris Haberlin from Davenport and Company.

J. Christopher Haberlin - Davenport & Company, LLC, Research Division

Quick question, I apologize if you mentioned this already, but as we look at the 5.1 million tons you have booked for next year, is virtually all of that thermal coal? Or is there a little bit of met in stokers sprinkled in there?

Peter T. Socha

Virtually all of that is thermal coal.

Operator

Our next question comes from David Feaster from Raymond James.

Operator

Our next question comes from David Beard from Iberia.

David E. Beard - Iberia Capital Partners, Research Division

Could you just talk about what your game plan would be in terms of selling coking coal next year, ratably weighted towards one end of the year, other end of the year, or is it price dependent or other?

Peter T. Socha

Yes.

Samuel M. Hopkins

I mean, our mantra is we try very hard to do what our customers want in terms of timing pricing. So if our customers want to negotiate on a 12-month basis, we do that. If they prefer a 3-month basis, then we try and make that happen, and then what we do is layer in our purchases together with our own production to make the transaction work for our company. So it seems that the trend out there is towards more short-term pricing, more 3-month pricing and less 12-month pricing. So, I guess, the way to say it is we're going -- at least on the international side, reprice our coal about every 3 months. Does that answer your question?

David E. Beard - Iberia Capital Partners, Research Division

Yes. That's helpful. And just when we look at your realized price versus the benchmark on a short-term basis, you seem to be hovering at a discount that's pretty tight. Is that a decent number to use for a discount, going forward, relative to the benchmark? Or could something move that more dramatically?

Samuel M. Hopkins

Yes, we're in the middle of negotiating, so I need to stay away from talking too much about that right now.

David E. Beard - Iberia Capital Partners, Research Division

Fair enough. And lastly, on the boats that were pushed, just a clarification, you've mentioned that -- were there some pricing issues that accounted for that versus demand?

Peter T. Socha

This is late pricing, late setting of the pricing, later then it was normally been. And I think that's as far as we're going to go, Joe.

Joseph Czul

Yes.

Operator

Our next question comes from Lance Ettus from Tuohy Brothers.

Lance Ettus - Mortar Rock Capital Management

A question about the PCI coal you guys were shipping out of the Jellico Mine. Was this kind of made possible or at least helped out by the IRP L&K purchase?

Peter T. Socha

Absolutely.

Lance Ettus - Mortar Rock Capital Management

And just how much more potential there is for crossover coals or further gains from this? And what is the kind of tonnage and, I guess, relative price increase you see from PCI versus what you were getting before?

Peter T. Socha

Well, the relative price bump is sort of $40, $50. The incremental tonnage, I don't think we've broken that out yet. Quite frankly, I'm not sure that we've maxed it out yet, either, and so I think I'll defer on that one. So it's a big price increase, big price change.

Operator

[Operator Instructions] Our next question comes from Michael Goldenberg from Luminous Management.

Michael Goldenberg - Luminus Management, LLC

It's Michael today. I wanted to see if there's any way you can help us break down the Central App sales position between met and steam, either in total, if possible, or maybe fine for the quarter, just any clarity you could provide for the breakdown.

Peter T. Socha

Yes, we're not breaking them out yet. We may in the next quarter. You may see us. In our next quarter and in the guidance, you may see a little bit more clarity on that. And in the first draft of this quarter, we actually had it in there, and I wasn't entirely comfortable with how it represented. So you may see that. That will be something we evolve into.

Michael Goldenberg - Luminus Management, LLC

I'm just curious in terms of level of comfort, is it something that was alluded early in the call as to which coals to consider met and which coals to consider steam? Or there are some other things that are preventing you from doing that?

Peter T. Socha

No. It's more market-related. It's not so much -- although there is some of which you just said, which is Joe is still actively -- Joe and his team are still actively looking at all of the various coals and, obviously, trying to up-price whatever we've got. So I'm not sure we found the exact number on tonnage on what we can sell as met, what we can sell as PCI. I think that's still a little bit of a work in process. I think we're pretty close to the end of it. I think -- I mean, I know, he's been through all the coals, but it's a question of getting comfortable with the customers. As I mentioned, we've shipped some PCI to the export market from the legacy assets. Those are test burns, and I think once we know how those test burns go, then we'll know a little bit more about how much we can push the envelope.

Michael Goldenberg - Luminus Management, LLC

Well, in the 1111 that was signed during the quarter for 2012, was it all steam or was there any...

Peter T. Socha

It was a very, very small amount of stoker coal in there.

Michael Goldenberg - Luminus Management, LLC

Got it. And stoker is something you would put into steam annually?

Peter T. Socha

Yes, that's correct.

Michael Goldenberg - Luminus Management, LLC

Okay. I just wanted to understand that. And then also, on Illinois coal, would you say that the contract you signed, the 46 -- 44, 46, 49, are those consistent with the markets for your coal? Are those consistent with Illinois benchmarks, or do you think you...

Peter T. Socha

Michael, Indiana is very much a different market. There's starting to be some coal that's crossing over from Illinois into Indiana, but it's just -- it's a marginal amount. But Indiana's like a closed market. It's kind of like Fort Lauderdale South, and Lauderdale is a different country. I love dealing, doing business in Indiana, but as a market itself, it's a closed market. And as C.K. mentioned earlier, we're in the process. We should have this month our rail load-out operational that we can take those coals out of Indiana. We're taking some to the export market now in this quarter, but we'll open up the market for our coals anyway outside of Indiana. So we're very happy with that.

Michael Goldenberg - Luminus Management, LLC

So as far as Indiana market goes, do you think you priced it at whatever the market is or what timing...

Peter T. Socha

There was no timing, so, I mean, no -- and actually, that was a long process. As you can imagine, doing a 2 or 3-year contract is a longer process, should be a longer process.

Michael Goldenberg - Luminus Management, LLC

Certainly. But this is indicative of what the coal should sell for today?

Peter T. Socha

Yes.

Operator

We have a follow-up from Justine Fisher from Goldman Sachs.

Justine Fisher - Goldman Sachs Group Inc., Research Division

I just wanted to confirm -- I have a follow-up. I just wanted to ask how many -- what's your run rate of stoker coal tonnage that you're doing right now on an annual basis, let's say?

Peter T. Socha

Yes. C.K.?

Coy K. Lane

We can run in the 800,000 to 1 million tons range out of the CAPP operations.

Justine Fisher - Goldman Sachs Group Inc., Research Division

Okay. And then on -- sorry to -- so the maintenance CapEx -- so you haven't given maintenance CapEx for the combined company, but what was it for James River standalone? I know you guys had given that. I just don't have it handy even if it's on a per-ton basis.

Peter T. Socha

We'll call you back. Somebody will call you back this afternoon.

Operator

And I'm showing no further questions at this time. I would now like to turn the call back to Peter Socha for closing remarks.

Peter T. Socha

Great. Thank you, Stephanie. Thanks for helping us out today, and we appreciate everyone joining us today, and we look forward to speaking to you again in either late February or early March. Bye now.

Operator

Ladies and gentlemen, that does conclude today's conference. You may all disconnect and have a wonderful day.

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