Cliffs Natural Resources (NYSE: CLF) has closed the sale of its remaining coal business, the Pinnacle longwall mine in southern West Virginia and the Oak Grove longwall mine in Alabama, to Seneca Coal Resources LLC.
Cliffs said Dec. 22 that it values the transaction at closing at $268 million based on Seneca Coal assuming all liabilities of the business. Additionally, Seneca Coal may pay Cliffs an earn out of up to $50 million contingent upon the terms of a revenue sharing plan which extends through the year 2020.
Lourenco Goncalves, Cliffs’ Chairman, President and Chief Executive Officer, said, “The sale of Pinnacle and Oak Grove to Seneca Coal marks Cliffs’ exit from the coal business, and represents another very important step in the implementation of our US iron ore pellet-centric, environmentally compliant strategy. We are pleased to have found a buyer that was able to agree on a transaction that not only brings real value to Cliffs shareholders, but will also preserve jobs for the exceptional people at these two mines.”
Goncalves added: “I commend the Cliffs’ coal operations team for an outstanding job achieving great safety, production and quality results, preserving the value of our coal business in light of the many headwinds the industry has faced over this past year. This transaction was only made possible due to the high quality of our people at the coal mines, and I wish them the very best as they move forward with Seneca Coal.”
Cliffs said that the transaction closed upon signing of the deal on Dec. 22. The company stated that the deal structure is a sale of the equity interests of Cliffs’ remaining coal business which includes the legal entities of Cliffs North American Coal LLC; Pinnacle Mining Co. LLC; Pinnacle Land Co. LLC; Oak Grove Resources LLC; Oak Grove Land Co. LLC; and Beard Pinnacle LLC.
Cliffs is a leading mining and natural resources company in the United States. It is a major supplier of iron ore pellets to the North American steel industry from its mines and pellet plants located in Michigan and Minnesota. Cliffs also operates an iron ore mining complex in Western Australia.
Seneca Coal is affiliated with West Virginia-based ERP Compliant Fuels LLC. Seneca plans to produce 4.4 million tons of metallurgical coal in 2016 and employ 811 people in West Virginia and Alabama. ERP is engaged in rebalancing the supply of domestic coal through the purchase, reclamation, and retirement of 135 mining permits in five states. ERP is actively marketing “Compliant Fuel”, which bundles reforestation carbon credits with coal sales, to reduce the rate of growth in atmospheric carbon dioxide. With the Seneca purchase ERP will operate three underground longwall mines, producing over 8 million tons of thermal and metallurgical coal annually. ERP earlier this year bought the Federal No. 2 longwall mine in northern West Virginia from bankrupt Patriot Coal.