TORONTO (miningweekly.com) – US number two coal producer Arch Coal on Friday said it had sold its Utah thermal coal operations to private company Bowie Resources, for $435-million, in a move to divest noncore assets, as Arch focused on its more profitable metallurgical coal business.
Bowie would take over Arch subsidiary Canyon Fuel Company, which included the Sufco and Skyline longwall mines and the Dugout Canyon continuous miner operation through the deal that was expected to close in the third quarter of 2013.
"The sale of our Utah operations is consistent with our plan to unlock value for our shareholders by divesting certain noncore thermal coal assets. As part of our strategy, we have been diligently focused on optimising our asset base, expanding our coal export network, reducing our discretionary capital spending and realigning our portfolio for growth," Arch president and CEO John Eaves said.
Coal prices have, in recent times, declined sharply, but metallurgical coal, used in steelmaking, retained better prices than thermal coal, which is mainly used in power generation.
Under the deal, Bowie would receive about 105-million tons of bituminous coal reserves. Bowie had indicated it planned to keep the existing 725-person workforce in place at the Canyon Fuel operations.
Eaves added that the divestiture of Canyon Fuel would streamline Arch's mine portfolio and allow it to focus on the most value-enhancing parts of its business, such as building out and upgrading the Appalachian metallurgical coal platform and optimising its low-cost thermal coal franchise to serve the domestic and export coal markets.
Arch would, however, retain its West Elk thermal coal mine, in Colorado, and about 300-million tons of coal reserves in the western bituminous region, including bituminous reserves located in southern Wyoming.
FBR Capital Markets & Co and Deutsche Bank were acting as financial advisers to Arch for the transaction, while Morgan Stanley & Co was acting as the financial adviser to Bowie.