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Alpha sells idle mine properties to eliminate self-bonding obligations


The State Journal

CHARLESTON, W.Va. — Alpha Natural Resources is transferring idle mine properties in West Virginia and three other states, eliminating its self-bonded reclamation obligations.

The company announced Wednesday, July 19, that it has entered into an asset purchase agreement with Lexington Coal Co. to convey real and personal properties in West Virginia, Kentucky, Illinois and Tennessee. The conveyance will include approximately 280 permits, reclamation equipment, ongoing royalty payments associated with the properties and 100 million tons of reserves.

No active mines are included in the transaction.

Lexington Coal Co. will receive about $204 million in cash at the time of closing and $112 million in installment payments to assist in the fulfillment of bonding, reclamation, water treatment and other obligations associated with the conveyed properties and permits.

“LCC has a decade-long history of reclaiming properties in a diligent and environmentally responsible manner, and Alpha is providing LCC with adequate resources to meet its obligations to the communities in which the properties are located Alpha CEO David Stetson said in a statement announcing the sale.

Alpha established a dedicated management team to oversee its idle and non-active properties after emerging from bankruptcy in July 2016, and that team will take senior leadership positions in LCC at the time of closing.

“The seamless transition of this management team, which knows the properties and permits and has a demonstrated track record of success, coupled with the conveyance of infrastructure and capital, will enable LCC to dedicate resources to accelerate the reclamation of the properties with less contingent exposure for the states,” Stetson said.

In addition to accelerating reclamation compared to current plans, the transaction with LCC will eliminate all remaining self-bonds in West Virginia, Alpha said. Before emerging from bankruptcy, Alpha had about $250 million in self-bonding outstanding. Alpha and West Virginia regulators have worked to reduce that exposure by more than $100 million over the past year. This transaction with LCC allows Alpha’s self-bonds in West Virginia to be replaced nine years ahead of schedule.

The closing is subject to various contingencies, including Alpha obtaining financing and entering into agreements with various state and federal regulatory agencies on the transfer of the permits. After closing, Alpha will continue to operate 19 mines and 9 prep plants in West Virginia, and the company still expects to produce 14 million tons of metallurgical and thermal coal in 2017. The parties expect to close during the third quarter of 2017.

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