Cliffs Natural Resources Inc. (NYSE: CLF), which has been hurting financially lately, has entered into a definitive agreement to sell its Logan County Coal assets in southern West Virginia to Coronado Coal II LLC for US$175m in cash and the assumption of certain liabilities.
Cliffs, mainly a producer of iron ore, anticipates using the cash proceeds from the sale for debt repayment. Cliffs’ other U.S. coal assets, the Oak Grove deep mine in Alabama and Pinnacle deep mine in southern West Virginia, are unaffected by this transaction.
Lourenco Goncalves, Cliffs’ Chairman, President and Chief Executive Officer, said in a Dec. 3 statement: “I am very pleased to be able to sell these assets to Coronado Coal, an experienced West Virginia-based coal operator. This transaction is another important step in executing our strategy to transform Cliffs into a stronger, pure-play U.S. iron ore supplier.”
The transaction will provide employment opportunities for many of the current Logan County Coal employees to become part of the Coronado Coal team. The company stated that it will continue to explore sale options for its other coal assets.
Completion of the sale to Coronado Coal II LLC is subject to a number of conditions including customary regulatory approvals. The parties expect to close the transaction by year-end 2014 and Cliffs expects to record a loss on the sale of assets in the range of approximately $375m to $425m on a pre-tax basis in the fourth quarter of 2014.
Coronado Coal LLC was formed August 2011 to acquire, develop, and operate coal assets throughout the world. The company is headquartered in Wilton, Connecticut. Veteran coal executives Garold Spindler and James Campbell are the founders of Coronado. Coronado’s website says the companyis financial partner is the Energy and Minerals Group (EMG), located in Houston, Texas. EMG is a private investment firm with a family of funds investing in the energy and minerals sector. Coronado acquired Greenbrier Minerals LLC and Midland Trail Resources LLC, which also operate in southern West Virginia, in April 2013.
Deutsche Bank Securities Inc. acted as financial advisor and Hahn Loeser & Parks LLP acted as legal advisor to Cliffs Natural Resources in this transaction.
Cliffs is a major iron ore producer in the Great Lakes region and a significant producer of high-and low-volatile metallurgical coal in the U.S. Additionally, Cliffs owns iron ore mines in Eastern Canada and operates an iron mining complex in Western Australia.
Cliffs on Dec. 3 also said that it has terminated its previously announced cash tender offers. They are being terminated because the company’s debt refinancing has been postponed due to perceived adverse market conditions.
“With the unfavorable move in market rates during the past few weeks, the prudent decision is to postpone the company’s refinancing plans until market conditions improve,” said Goncalves. “Cliffs has ample liquidity and strong financial flexibility. Accordingly, we will be patient and disciplined in assessing the capital markets. We appreciate the positive response received in our tender offers.”