Consol Energy sells Buchanan Mine for $420 million

March 1, 2016

Consol Energy Inc. is selling its Buchanan Mine to Coronado Coal for $420 million to help pay off debt as it continues to shift toward natural gas.

The Buchanan Mine is one of Consol’s largest coal mines and its sale will help bolster the balance sheet of the company which is struggling with persistent low prices in its coal and natural gas operations. The company has reduced operations at its mines, laid off workers, stopped drilling gas wells and said it would halt dividend payments to investors, Pittsburgh’s Tribune Live reported.

The move puts the company one step further from its traditional business of mining and selling coal.

The ninth-biggest producer of shale gas in Pennsylvania, Consol in 2013 sold five West Virginia mines that held the company's original name of Consolidation Coal Co. Last year, it spun off operation of its sprawling coal mine complex beneath Greene and Washington counties into the master limited partnership CNX Coal Resources.

“This is another significant event in the execution of Consol Energy's strategy, as well as a meaningful step in continuing to strengthen our balance sheet,” CEO Nicholas J. DeIuliis said in announcing the Buchanan sale. “The Buchanan Mine fits into Coronado's portfolio as a pure ... metallurgical coal producer, and, in the end, this transaction bolsters the strategic position of both companies.”

Consol last year planned to spin off the met coal operations into its own limited partnership. The soft market prompted the company instead to consider moving Buchanan under CNX Coal Resources' control or partnering with another company, DeIuliis told analysts last year.

Consol had reduced operations at Buchanan for more than a year because of the price slide after laying off 188 workers in 2014, though in its most recent quarterly earnings report the company called the mine “competitive and profitable.”

“Our Buchanan Mine posted strong cost reduction sequentially and is likely the only met mine generating a profit in the United States at these low met price levels,” Chief Financial Officer Dave Khani told analysts in January.

Consol said then it had increased its contracts with domestic customers for the coal coming from Buchanan. Coronado is glad to benefit from those contracts and hopes to add to them, said Garry Groves, its vice president for human resources and administration.

“We'll be looking everywhere we can for customers,” Groves said, adding that Coronado had no plans to further reduce production at the mine.
The sale to Coronado includes Consol's idled Amonate Mine in southern West Virginia and southwest Virginia, and some untapped reserves in Virginia and Pennsylvania.

Coronado, which has offices in Wilton, Conn., and Rupert, W.Va., formed in 2011 and operates met coal mines in southern West Virginia. It is backed by Texas-based private equity firm Energy and Minerals Group.
 

 

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