Westmoreland completes buy of Chevron’s Kemmerer mine

Westmoreland Coal Co. (NasdaqGM:WLB) announced Jan. 31 the completion of the acquisition of Chevron Mining Inc.’s Kemmerer coal mine in Lincoln County, Wyo.

This sale completes Chevron Mining’s exit from the U.S. coal mining business, following the 2011 sale of its North River longwall mine in Alabama to Walter Energy (NYSE:WLT). Chevron shut its McKinley strip mine in New Mexico at the end of 2009 after it ran out of coal. Chevron Mining is a unit of oil giant Chevron Corp. (NYSE: CVX)

Total consideration for the purchase of the Kemmerer mine included a cash payment of $76.5m and the assumption of approximately $118m in certain liabilities, including post retirement medical, pension, black lung, and asset retirement obligation liabilities.

“We are pleased to have completed this transaction and look forward to working with the customers of the Kemmerer mine,” said Keith Alessi, Westmoreland President and CEO. “We also welcome the employees of the mine to the Westmoreland family. The Kemmerer mine is an excellent strategic acquisition for us and represents both growth and diversification for our business.”

Over the last five years, Kemmerer has produced, on average, 4.8 million tons of high-quality sub-bituminous coal for sale to the adjacent Naughton power station, as well as various industrial customers located in the region. The transaction includes: about 118 million tons of coal reserves as of the end of 2011, enough for 20 years of production; a skilled and stable workforce; recently installed state-of-the-art coal preparation and loadout facilities; strong customer commitments; and an expansive fleet of well maintained mining equipment. Substantially all of Kemmerer’s projected production for 2012 through 2016 is committed and priced under existing sales contracts.

Naughton is a three-unit plant with a total generating capability of about 700 MW that is operated by PacifiCorp.

Westmoreland separately announced on Jan. 31 that it and certain of its subsidiaries have closed the offering of $125m aggregate principal amount of Senior Secured Notes due 2018 in a private placement. The notes are additional notes to the already outstanding $150m principal amount of existing 10.75% Senior Secured Notes due 2018.

The proceeds from the offering of the notes will be used primarily to finance the acquisition of the Kemmerer mine. Westmoreland expects to use $76.5m as cash consideration for the acquisition and approximately $24.7m for reclamation bonding collateral for Kemmerer. The remainder will be used to fund Kemmerer’s initial working capital, to pay all estimated transaction fees and expenses incurred in connection with this offering, and for general corporate purposes.

Westmoreland is the oldest independent coal company in the U.S., with coal operations in the Powder River Basin in Montana, sub-bituminous mining in Wyoming and lignite mining operations in Montana, North Dakota and Texas. Its power operations include ownership of the two-unit ROVA coal-fired power plant in North Carolina.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.