Consol unloads Virginia coal mine for $420 million
Consol Energy (NYSE:CNX) today shored up its flagging balance sheet with the sale of its Buchanan mine in southwestern Virginia and other assets for close to half a billion US.
Consol, one of the largest coal producers in the United States, sold Buchanan – and other metallurgical coal reserves in West Virginia, Virginia and Pennsylvania – to Coronado IV LLC for US$420 million, which includes $398 million cash at the close of the transaction, the company announced. Around 88 million tons of the 400 million tons included in the sale are from the Buchanan mine, which employs a longwall and continuous mining system. The right to extract and sell gas is not included in the deal, which according to Consol was done to pay down debt.
"This is another significant event in the execution of CONSOL Energy's strategy, as well as a meaningful step in continuing to strengthen our balance sheet," said Nicholas J. DeIuliis, Consol president and CEO. "The Buchanan Mine fits into Coronado's portfolio as a pure play metallurgical coal producer, and, in the end, this transaction bolsters the strategic position of both companies."
After the deal is completed in the first quarter, Consol will only have three mines left in southwestern Pennsylvania and one site, the Miller Creek complex, in southern West Virginia.
Coronado IV is a metallurgical coal company backed by Energy & Minerals Group (EMG), a private equity firm specializing in energy and mining. EMG has $16.8 billion under investment according to its website.
In the same press release, Consol also said it was suspending its quarterly dividend, which currently stands at $0.01 per share, to "further reflect the company's increased emphasis on growth."
Investors appeared to endorse both decisions; by the end of the day, Consol's stock had gained 10 percent in New York.
The news from Consol comes on the same day that China, the world's largest coal consumer, said it plans to lay off 1.8 million coal and steel workers as part of the government’s ongoing efforts to reduce industrial overcapacity. In December, Beijing said it would not approve any new coal mines over the next three years and that it would shut more than 1,000 coal mines in 2016, taking out 60 million metric tons of unneeded capacity.
The bad news keeps piling up for coal. Earlier this month Goldman Sachs published a new report saying that the demand for thermal coal is "irreversible", and last fall, the investment bank made headlines when it predicted that “peak coal” was drawing near. In the United States, 42 coal companies had declared bankruptcy since 2012, as of last June, according to S&P Global Market Intelligence.