Coal Age

DEC 2017

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4 December 2017 news Contura Sells PRB Assets to Blackjewel b r e a k i n g n e w s Warrior Met Nearly Triples Coal Sales In its most recent earnings statement, Warrior Met Coal reported a 279% year-on-year improvement in coal sales. The company report- ed third-quarter 2017 net income of $119.7 million, compared to a net loss of $33.6 million in the third quarter of 2016. The market for high-quality premium met coal has tightened, and the Alabama- based coal operator is reaping the rewards of several recent strategic decisions. "Warrior's results in this quarter continue to reflect the strong de- mand for our premium met coal and our industry leading margins," said Walt Scheller, CEO of Warrior. "Strong sales volume coupled with high-price realization and an exceptionally low-cost structure enabled us to achieve strong free cash flow conversion." The company produced 1.6 million tons of met coal in the third quarter of 2017, nearly three times the amount produced in the pri- or-year period. "We are undertaking the moves necessary to increase our production levels in a responsible manner, and that work will con- tinue in the months ahead as we move closer to achieving the name- plate production capacity in our two mines," Scheller added. Total revenues were $312 million for the third quarter of 2017, includ- ing $303 million in mining revenues, which consisted of met coal sales of 2.1 million tons at an average selling price of $144/ton. Sales volume increased 279% over the third quarter of 2016 and increased 8% over the second quarter of 2017. Warrior capitalized on the strong pricing environ- ment in the quarter by selling down higher than normal inventory levels built from strong production performance in the first half of the year. Executing a move that narrows its focus to eastern U.S. opera- tions and reduces reclamation obligations, Contura Energy said it plans to sell Contura Coal West LLC and related entities to Black- jewel LLC. The sale includes the Eagle Butte and Belle Ayr mines, which are located in Wyoming's Powder River Basin (PRB), along with related coal reserves, equipment, infrastructure and other real properties. Combined, the two mines shipped 24.5 million tons through the first three quarters of 2017, and Contura sub- sidiaries controlled approximately 600 million tons of proven and probable PRB reserves. Under the terms of the transaction, Contura will receive de- ferred consideration of up to $50 million through various royalty payments. Blackjewel will assume all permit and reclamation ob- ligations associated with the assets acquired, thereby eliminating approximately $200 million in undiscounted reclamation obliga- tions for Contura. This transaction is expected to generate signifi- cant income tax deductions of approximately $400 million to $450 million for Contura, which would be available to offset taxable income in 2017 and future years. The company expects to incur a book loss on the sale, which will be recorded in the fourth quarter. "This transaction allows us to further sharpen our focus on the company's well-positioned eastern assets and a growing met sales portfolio," said Kevin Crutchfield, CEO, Contura Energy. "[Blackjewel] is acquiring two solid mines with decades of min- able reserves, a top-notch, professional workforce and a great op- erating track record." Contura's production profile will now consist primarily of metallurgical coal mines in Central Appalachia and its under- Combined, Contura's two PRB mines, Belle Ayr and Eagle Butte, ship 24.5 million tons through the fi rst three quarters of 2017.

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