Cliffs agrees to sell coal mines in West Virginia
Cliffs Natural Resources agreed to sell its coal assets in Logan County, WV to Coronado Coal LLC for $175 million in cash.
Coronado Coal will acquire three mines producing metallurgical coal for steelmaking, and also assume some liabilities. Cleveland-based Cliffs expects to record a pretax loss on the sale of as much as $425 million in the fourth quarter, it said today in a statement.
The sale is seen as another move by Cliffs to exit the coal business and focus on its iron ore business in the United States, Bloomberg reported.
Cliffs said it will use the cash proceeds to pay down debt. The company is suffering from plunging prices for iron ore and metallurgical coal, triggered by a slowdown in the Chinese steel industry. In October, Cliffs’s credit rating was cut to junk by Standard & Poor’s and the company took a $5.7 billion writedown on its mining assets.
Since becoming chairman and chief executive officer in August, Lourenco Goncalves has started unloading some of Cliffs’s previous acquisitions. The company said last month it may close the Bloom Lake iron ore mine in Canada, which it purchased as part of a $4.3 billion takeover in 2011. Cliffs said today it’s still looking at options to sell its other coal assets.
“While Lourenco is likely to bring positive change to the company, we believe these efforts may be largely offset by the negative industry fundamentals surrounding iron ore and the uphill battle caused by previous management decisions,” analysts at Cowen & Co., led by Anthony Rizzuto, said in a report today.
The company’s North American coal unit, which also includes the Pinnacle mine in West Virginia and the Oak Grove mine in Alabama, had a negative sales margin of $24.3 million in the third quarter on sales of $170.5 million Coronado, based in Wilton, Connecticut, is a closely held company backed by private-equity firm Energy & Minerals Group, according to its website. Coronado’s Chairman and CEO is Garold Spindler, the former CEO of U.K. Coal Plc.
