Arch Coal Inc today said it is selling three of its non-core thermal coal mines in Utah to Bowie Resources for $435 million in cash, in order to focus on its metallurgical coal assets.
Arch will sell its wholly-owned subsidiary Canyon Fuel Co, which includes the Sufco, Skywall and Dugout Canyon thermal coal mines in Utah. In addition to these active operations and related support facilities, Bowie will receive approximately 105 million tons of bituminous coal reserves in Utah.
In 2013, Arch Coal had forecast that Canyon Fuel would sell around 9 million tons of coal, primarily to regional power producers and domestic industrial facilities in Utah, Nevada and California.
Based on such sales, Canyon Fuel was projected to generate pro forma EBITDA of roughly $90 million, with planned capital expenditures of $15 million to $20 million, in 2013.
Post closing, Bowie plans to keep the existing 725-person workforce at the Canyon Fuel operations.
Arch Coal said that it will retain its Mountain Coal Company's West Elk mine in Colorado and approximately 300 million tons of coal reserves in the Western Bituminous Region, including bituminous reserves located in southern Wyoming.
"The sale of our Utah operations is consistent with our previously announced plan to unlock value for our shareholders by divesting certain non-core thermal coal assets," said John Eaves, president and CEO of St Louis-based Arch Coal.
"As part of our strategy, we have been diligently focused on optimising our asset base, expanding our coal export network, reducing our discretionary capital spending and re-aligning our portfolio for growth. With this transaction, we're delivering on a number of these initiatives while also enhancing our financial flexibility,'' he added.
"From the inception of our ownership of Bowie, our goal has been to establish a core business rooted in the Western Bituminous Region and to grow it, not only organically but with synergistic acquisitions," said John Siegel, a principal owner of Bowie. "In that context, it would be hard to imagine a more logical next step in our evolution than the purchase of these superior Canyon Fuel mines."
Arch Coal is one of the world's top coal producers for the global steel and power industries, with customers in 25 countries.
Its network of mining complexes is the most diversified in the US, spanning every major coal basin in the nation. The company controls 5.4-billion-ton reserve base of high-quality metallurgical and thermal coals.