By Taylor Kuykendall

Coal magnate Chris Cline, well-known for his early bet on the promise of Illinois Basin coal, says he would like to build out the international presence of his Cline Group LLC to be as large as the company's domestic footprint.

Such an ambitious goal, Cline told SNL Energy, will take "excellent managers." The billionaire coal executive's choice to lead the endeavor, former Alpha Natural Resources Inc. President Paul Vining, is expected to take over his new role as CEO of Cline's Cutlass Collieries LLC, a unit separate from Cline's publicly traded Foresight Energy LP, in February.

"The nations of the world are industrializing rapidly and need electricity," Cline said. "Amateurs talk strategy; professionals talk logistics. We are looking in Canada and Australia. In both places, we will be looking to own or operate large operations with logistic infrastructure that can support operations in all parts of the commodity cycle. The market we will focus on, internationally, will be Asia."

Cutlass is the Cline affiliate that recently acquired the Donkin coal project, a Canadian mine with a large, permitted reserve base that extends under the ocean, from Morien Resources Corp. and Glencore Plc. Much of the infrastructure for the project is in place from before the Canadian government, once in the business of mining coal, abandoned the project. The mine is located near multiple potential customers and a deep water port in Sydney, Nova Scotia.

Cline said the Donkin reserve is the closest North American reserve to Europe and is permitted to load directly into vessels. Vining said in an interview with SNL Energy that the Donkin project has several advantages in completing a "checklist of items" used in assessing the risk of a new project, including both the logistic advantages touted by Cline as well as the inherent flexibility of the mine's reserves, which include coking and thermal coal.

According to information published by Morien, Donkin contains 481 million tonnes of indicated and inferred resource. The 15-foot coal seam is estimated to contain about 58 million tonnes of probable minable reserves that are accessible via two tunnels 25 feet in diameter and two miles long.

Fresh off public debut, Cline peers abroad

In a release distributed by Cutlass, Vining said that he believes that the "future success of this industry" is "tied to how each company develops its overseas opportunities." While the U.S. markets are currently flat or contracting due to natural gas price competition and regulatory challenges, Vining said, internationally "there's still a fairly healthy growth" potential in the coal sector.

To take advantage of that, Vining said, the Cline Group's international ventures will be focused on projects that can create value on the lower end of the cost curve.

"Adversity breeds opportunity," Vining told SNL Energy. "You have to be a little bit bold and you have to be willing to take a measured amount of risk — that being limited downside with hopefully a lot of upside."

While many coal companies are either in "wait and see" or "pulling back" modes due to the commodity price cycle, Vining said, the Cline Group is looking for opportunities.

"It's time to take advantage of that if you're looking at asset values on the cycle as it's going through the trough, which is if not happening now, we're certainly in the middle of the trough," Vining said. "… I won't say we're on a shopping spree, but we're taking a very disciplined, studied approach to opportunities that are out there, mainly in Canada and Australia for reasons of the resources that are available. A lot of the infrastructure is already in place."

The 60-year-old Vining will officially finish his stint at Alpha on Jan. 31. Alpha, an Appalachia-focused coal producer, has recently lost much of its market value as thermal and metallurgical coal markets have suffered, though Vining said he would not trade his experience at Alpha.

The executive is leaving Alpha despite a $750,000 bonus on the table if he remained with Alpha through Feb. 28 and an additional $750,000 if he remained with Alpha through the same period into 2016, according to a 2014 disclosure. His attraction to the Cline Group, he said, was about the opportunities he sees for international coal projects.

"Chris and I kept in contact over the years on various topics, and as things started to get somewhat stress-cracked and fractured on the international markets, you start thinking about this opportunity and we spent a few sessions together talking about the window that might be here and potentially how to approach it and where those opportunities may or may not be and one thing led to another," Vining said.

Cline was confident that Vining is the executive to do the job. Noting that he was "not in the business of handing someone like Paul Vining tasks," Cline said Vining knew what needed to be done to execute Cline's own vision of the group's international efforts.

"Decisions like this — with whom to grow these operations — are less about process than it is about chemistry," Cline said. "Paul has seen and done it all in his career. He's good with people, and he's smart. Those are the attributes we value in our organizations, and he's a good fit."

One hope for the two coal executives may be a repeat of Cline's success in the Illinois Basin. His newly public Foresight has been the envy of operators mining in less profitable coal regions such as the Central Appalachia Basin.

Cline earned a reputation for gaining an early presence in the basin when he bought up high-sulfur Illinois Basin coal reserves at a time when the market had little desire for such coal. Advances in scrubbing technology, however, created a surge in demand for the generally cheaper and low-cost coal.

Vining said he sees Cline as a leader typically ahead of the rest of the coal sector, "sometimes by years" in his decisions. Vining said Cline now has a vision of opportunity on the international side of coal markets and that fulfilling that will take a commitment Cline has exhibited in past.

Cline and Vining did not go into many details on potential international projects, though Cline said the company is seeking "highly productive longwall mines in Canada and Australia." He said the assets under consideration are long-lived, low-cost projects that "should thrive in any coal price environment."

Vining's new position does not directly affect Cline's publicly held Foresight. Cline said that the risks of the international projects being considered were not the sort the Cline Group would ask Foresight owners to bear at the current development curve and condition of the coal commodity cycle.

"Foresight Energy and the Cline Group have very different risk profiles," Cline said. "Greenfield development in a foreign jurisdiction will have its difficulties and complications."