Cliffs Natural Resources (NYSE: CLF) has completed the sale of its Logan County Coal assets in southern West Virginia to Coronado Coal II LLC, an affiliate of Coronado Coal LLC, for $174m in cash and the assumption of certain liabilities.
The expected tax benefit associated with the transaction will be between 20% to 25% of the previously disclosed pre-tax loss of approximately $400m, which represents an additional benefit of $80m to $100m in future cash tax savings. Cliffs said Jan. 2 that it will record the results of this sale in its fourth quarter earnings.
Separately, Cliffs confirmed that active production at Bloom Lake has completely ceased and the exit from Eastern Canada continued to be executed on schedule as previously announced. The mine has transitioned to care and maintenance status and, consequently, at this time only a small number of employees involved in such activities are still in the payroll. The last shipment of iron ore out of the Port of Sept-Iles will be completed in early January 2015.
Lourenco Goncalves, Cliffs’ Chairman, President and Chief Executive Officer said, “The execution of the strategic initiatives outlined during our Q3 Conference Call in October 2014 continued to progress as planned during the last two months. The sale of Logan County Coal, which included a meaningful tax benefit to the Company, clearly demonstrates our ability to execute complex transactions despite an adverse M&A environment for commodity related transactions. Additionally, as we approach the final steps of our exit from Eastern Canada, we have brought to an end the flawed expansion that has cost Cliffs and its shareholders billions of dollars.”
Goncalves added: “As Cliffs becomes a nimble company sharply focused on being the major supplier of iron ore to the American steel industry, with no U.S. iron ore contracts re-setting any time in 2015 or 2016, no portion of our public debt maturing until 2018, and a strong 2015 economic forecast for the United States, we believe that we are better positioned than any other iron ore mining company in the world to deliver profits in 2015.”
Cliffs Natural Resources is a major supplier of iron ore pellets to the U.S. steel industry from its mines and pellet plants located in Michigan and Minnesota. Cliffs also produces low-volatile metallurgical coal in the U.S. from its mines in West Virginia and Alabama. Additionally, Cliffs operates an iron ore mining complex in Western Australia and owns two non-operating iron ore mines in Eastern Canada.
Coronado Coal LLC was formed August 2011 to acquire, develop, and operate coal assets. It is headquartered in Wilton, Connecticut. Veteran coal executives Garold Spindler and James Campbell are the founders of Coronado. Coronado’s website says the company’s 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.
The Cliffs Logan County Coal (CLCC) property is located within Boone, Logan and Wyoming counties in southern West Virginia. CLCC currently produces metallurgical and thermal coal from surface and underground mines that are served by a preparation plant and unit-train load out facility on the CSX Transportation railroad.