Coal news and updates

Alpha selling Amfire coal assets in Pennsylvania

Alpha Natural Resources, a Virginia-based company and one of the country's largest metallurgical coal producers, said Thursday it will sell a large chunk of its Pennsylvania operations to Kittanning-based Rosebud Mining Co.

In an $86 million deal, Alpha has agreed to sell substantially all the assets of its Latrobe subsidiary Amfire Mining Co LLC. The transaction is expected to close before the end of the year and yield $75 million in cash.

According to the Mine Safety and Health Administration, Amfire has five surface mines, four facilities such as coal preparation plants, and five underground mines in Pennsylvania. Amfire mines, located in seven central Pennsylvania counties, produced about 1.7 million tons of coal, of which 1.2 million is metallurgical coal, during the first nine months of 2014.

Rosebud is a privately-held coal company, whose president, Cliff Forrest, owned the now-bankrupt Freedom Industries. Freedom Industries leaked chemicals into the Elk River in January, contaminating water supplies that served 300,000 West Virginians.

Rosebud has 18 underground mines in Pennsylvania and four in Ohio. It also has three surface mines and 11 other facilities, mostly in Pennsylvania. The company sells both thermal and met coal.

Alpha's CEO Kevin Crutchfield told analysts Thursday that while Amfire’s assets were fetching some of the higher prices the company was seeing, “It was regionally disparate from other assets that we have and there are some other regional operators up there that expressed an interest in it.”

Over the past year, Alpha has looked to cut costs as coal producers across the country struggle with low prices for both thermal coal, which is burned in powerplants, and metallurgical coal, which is used in steelmaking.

In July, the company said it might lay off as many as 1,100 workers at 11 southern West Virginia mines, citing poor market conditions and pressure from government regulations.

It subsequently idled two of those mines while keeping others open, pending a longer term decision about their fate.

In August, Alpha announced it would wind down and close its Emerald Mine in Greene County towards the end of next year.

The coal producer, in its third quarter earnings release Thursday morning, sounded another pessimistic note.

The company posted a net loss of $185 million, or 84 cents per share for the past quarter, narrowing the loss from $458 million, or $2.07 per share, during the same period last year.

Alpha’s report outlined a bleak market for metallurgical coal, much of which is shipped abroad.

The company predicted the market will remain oversupplied and prices will stay low for at least the next year. During discussions with analysts on a conference call Thursday, Mr. Crutchfield indicated it might be longer than that.

“The global seaborne metallurgical coal market has shown no meaningful improvement over the last several months and continues to exhibit dynamics of an oversupplied market,” the company said in its earnings release.

Meanwhile, Alpha is taking another bet on shale gas, after its earlier joint venture with Rice Energy whose IPO earlier this year brought Alpha $100 million in cash and Rice stock currently valued at $170 million.

This time, Alpha is partnering with EDF Trading Resources, in a half-way split of more than 20,000 acres somewhere in southwestern Pennsylvania.

The joint venture is just beginning to drill wells and expects to have at least six by the end of next year.

Source: powersource.post-gazette.com