Massey Energy to acquire coal producer Cumberland for $960 million
17 March 2010
Massey Energy Co., the fourth-largest coal producer in the US, yesterday agreed to acquire privately-held coal producer Cumberland Resources Corporation for $960 million in cash and stock in order to increase its production and reserves.
Of the $960 million that Massey will pay under the terms of the deal, $640 million will be in cash and $320 million in shares of its common stock.
Cumberland, with 2009 revenues of $550 million is one of the largest a privately-owned coal producer in the US having its headquarters in Abingdon, Virginia. It operates underground and surface coal mines in Southwestern Virginia and Eastern Kentucky, and sold 7.8 million tons of coal in 2009.
Its assets include an estimated 416 million tons of contiguous coal reserves, a preparation plant in Kentucky served by the CSX railroad and a preparation plant in Virginia served by the Norfolk Southern railroad. Of the estimated reserves, Massey believes more than half or 216 million tons have metallurgical coal qualities.
Cumberland's existing operations currently produce both steam and metallurgical quality coals. Approximately 4.8 million tons of its current annual production is of metallurgical quality of which 800,000 tons are currently being sold into the metallurgical coal market.
Massey expects to be able to produce approximately 5.0 million tons of metallurgical quality coal annually with the existing Cumberland assets. Massey does not expect any additional development capital would be required to reach this production target.