TORONTO (miningweekly.com) – US coal producer Patriot Coal has taken "another important step forward" in its Chapter 11 reorganisation process, says president and CEO Bob Bennett, who expects to emerge from the Chapter 11 process as expeditiously as possible.

The company announced on Monday that ERP Compliant Fuels (ERP), an affiliate of Virginia Conservation Legacy Fund (VCLF), will potentially buy a substantial portion of its assets and liabilities not included in the previously announced sale agreement with Blackhawk Mining. Patriot believed it would finalise the sale process, during which its mining operations and customer shipments would continue as normal, with the VCLF transaction.

“With VCLF and Blackhawk, Patriot has now entered into agreements to sell effectively the entirety of the company, and we will move expeditiously to close both transactions so that we can successfully emerge from bankruptcy within the coming months,” Bennett highlighted.

Patriot would file an asset purchase agreement under its Chapter 11 reorganisation process with the bankruptcy court and was subject to the court's approval of the sale, confirmation of a Chapter 11 plan and other customary conditions.

The company would also file a motion with the bankruptcy court to authorise the proposed bid protections and, as with the Blackhawk agreement, the VCLF transaction would be subject to higher and better bids. Patriot expected to close the VCLF sale in parallel with the Blackhawk transaction.

Under the terms of the agreement with VCLF/ERP, Patriot would dispose of, among other assets and liabilities, the Federal mining complex, in northern West Virginia, the Corridor G mining complex, in southern West Virginia, and other mining permits for purposes of land reclamation and water-quality improvement.

VCLF/ERP would potentially assume liability of more than $400-million in connection with Patriot's workers' compensation, state black lung and environmental obligations. In addition, VCLF/ERP would assume or replace surety bonds supporting reclamation and related liabilities associated with the purchased assets.

"In VCLF, we have found an experienced partner who will responsibly manage our remaining assets consistent with the highest environmental standards and we believe this proposed transaction is in the best interest of Patriot and its stakeholders,” Bennett said.

He added that Patriot was making progress in its sale process with Blackhawk and continued to expect that a substantial majority of people employed at its mining operations would be retained by Blackhawk or VCLF when the transactions were completed.

VCLF CEO Tom Clarke, who billed the agreement as a landmark achievement for the fund, confirmed this supposition. He stated that VCLF expected to maintain employment in West Virginia at the current 683 employee level and expand Appalachian employment through its investment of up to $176-million in land reclamation, reforestation and water-quality improvement.

“Continued mining at [the Federal mining complex] will allow us to launch our 'compliant fuel' programme, which bundles reforestation carbon credits with coal sales, effectively reducing carbon emissions, as required under the new emission standards,” he outlined.