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the steel industry and a consequent decline in U.S. steel <br /> production. <br /> Due to freight costs, the Debtor was non-competitive in <br /> the eastern United States steel production market. The two primary <br /> customers for the Debtor's coal production were located in the <br /> western United States: the Fontana steel works owned by Kaiser <br /> Steel in California and the Geneva steel works owned by USX in <br /> Utah. In 1981, Kaiser Steel closed the Fontana works, and in 1986, <br /> USX closed the Geneva works. <br /> The Debtor then attempted to develop profitable supply <br /> relationships with overseas steel producers, particularly Pohang <br /> Iron & Steel Company, Ltd. , located in The Republic of Korea. The <br /> Debtor entered into a supply contract calling for the delivery of <br /> 400,000 tons of coal per year through April 1992. Coal was shipped <br /> via rail to the Port of Los Angeles and loaded onto freighters. <br /> The price realized from these sales, net of shipping costs, was <br /> less than the Debtor's cost of production. <br /> In September 1987, the Geneva works closed by USX were <br /> reopened by a new owner, now named Geneva Steel Corporation <br /> ( "Geneva" ) . The proximity of the Mine to Geneva produced a <br /> significant cost advantage relative to eastern coal suppliers and <br /> Geneva became the Debtor's primary customer in the late 19801s. <br /> The Debtor entered into a supply contract calling for the delivery <br /> of 550,000 tons of coal per year through June 1992. <br /> Beginning in 1981, the Debtor undertook a major <br /> modernization program designed to reduce costs and increase coal <br /> productivity, thereby permitting the Mine to operate profitably in <br /> the changing steel market. The Debtor made in excess of $60 <br /> million of capital improvements, including raising coal preparation <br /> plant capacity to 600 tons per hour; driving twin adits 14,665 feet <br /> long which are used for transportation, mine drainage, belt <br /> haulage, ventilation, and escapeways; installation of belt <br /> transportation from working faces to stockpile areas near the <br /> preparation plant; and conversion from room and pillar mining to <br /> advancing longwall mining on three faces, creating a productive <br /> capacity in excess of 1,000,000 tons per year of clean coal. The <br /> Mine property, plant, and equipment had a book value of $40.4 <br /> million at December 31, 1990; the replacement cost of the equipment <br /> is estimated by management to be in excess of $84 million. <br /> C. Intercompany relationships <br /> The Debtor is the wholly-owned subsidiary of Mid- <br /> Continent Minerals, Inc. ( "Minerals" ) . The shareholders of <br /> Minerals are John A. Reeves Sr. , Jacqueline T. Reeves, Donald J. <br /> Joyce Sr. , Robert Delaney, Leonard Ring, Leonard Ring Children's <br /> Irrevocable Trust, Thomas Gibbs, Trustee, and Pitkin Iron <br /> 2 <br />