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Contura Energy, Alpha Natural Resources to rejoin forces

30th April 2018

By: Henry Lazenby

Creamer Media Deputy Editor: North America

     

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VANCOUVER (miningweekly.com) – Coal producers Contura Energy and Alpha Natural Resources have signed a definitive deal to merge the two entities that were split after Alpha filed for Chapter 11 bankruptcy protection in August 2015.

The move is expected to create the largest US metallurgical coal producer, which on a pro forma basis, produced 12.6-million tons of metallurgical coal and 13.8-million tons of thermal coal, excluding sales from divested assets, in 2017.

“While this transaction would probably not have been possible even a year ago, resurgent global coal markets, a tightened production profile by way of recent asset divestments made independently by both Alpha and Contura, and resulting potential cost synergies together provide an exciting opportunity for value creation through combining our respective operational portfolios,” said CEO Kevin Crutchfield

Formed by a group of Alpha’s former first lien lenders, Contura launched in July 2016 with an initial acquisition of certain coal assets from Alpha, concurrent with Alpha’s emergence from its Chapter 11 reorganisation process. Under the terms of the agreement, Alpha shareholders will receive 0.4071 Contura common shares for each Alpha Class C-1 share and each Alpha common share held, representing about 46.5% ownership in the merged entity, and Contura holding the 53.5% balance.

The companies said in a joint statement that they expect synergies from the transaction in the range of $30-million to $50-million.

The combined entity will retain the Contura Energy name and will be led by Contura’s existing management team, with Crutchfield continuing as CEO. Alpha’s chairperson and CEO, David Stetson, will resign his role and transition to the Contura board. Immediately after closing, the Contura board will be composed of the five existing Contura directors as well as currently Alpha board members David Stetson, Daniel Geiger, John Lushefski and Harvey Tepner.

Contura will list on the NYSE, and its assets will mainly comprise a diversified production profile of metallurgical and thermal coal mines in Central Appalachia, a longwall thermal coal mine in Northern Appalachia, one of the largest met coal reserves of about one-billion tons in the US, and a 65% stake in the Dominion Terminal Associates coal export facility, located in Newport News, Virginia.

The transaction is expected to close during the third quarter.

Low prices for steelmaking metallurgical coal and electricity-generating thermal coal, caused by a supply glut, lower demand, tighter environmental policies, cheap natural gas and growing contributions from alternative energy sources had pushed major producers, including Peabody Energy, Arch Coal and Alpha, to go through the Chapter 11 reorganisation process.

Contura’s OTC-quoted equity gained about 3.75% on Monday morning to an intra-day high of $69 a share, while that of Alpha jumped more than 13% to a new 52-week high of $25.60 apiece.

Edited by Creamer Media Reporter

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