October 14, 2015 Read More →

WSJ: ‘Who Wants to Buy a Coal Mine?’

John W. Miller and Matt Jarzemsky for the Wall Street Journal:

“There’s just a vacuum of strategic buyers, especially at a larger scale,” said Fred Vescio, a managing director at investment bank Houlihan Lokey.

Three major U.S. coal companies—Patriot Coal, Alpha Natural Resources Inc. and Walter Energy Inc.—filed for bankruptcy protection this year. Patriot is selling most of its assets to Blackhawk Mining LLC, a Kentucky-based regional miner founded five years ago by coal entrepreneur Mitch Potter. Alpha Natural has said it won’t immediately sell mines as part of its restructuring. Walter Energy is evaluating options after last month’s breakdown of its initial restructuring plan, which would have given creditors ownership of a slimmed-down version of the company.

Investors are put off by the U.S. coal industry’s bleak long-term outlook. Coal burned by power plants faces competition from cheap and relatively clean natural gas, and a slowdown in demand from China has driven the price of coal used in steelmaking to an 11-year low.

In an email, Wilbur Ross, the billionaire who revels in reviving down-and-out industries, said he’s not inclined to invest in coal assets because of Environmental Protection Agency regulations, the decline of Appalachian reserves and inexpensive natural gas.

Mr. Ross isn’t the only big player on the sidelines. Billionaire coal investor Chris Cline hasn’t bought any new mines this decade. Nor has former Xstrata PLC chief Mick Davis, who now runs a fund called X2 Resources. Other cash-rich mining funds, such as Aaron Regent’s Magris Resources Inc., are investing in mines. But coal, said Mr. Regent, “is not at the top of our list.” Mr. Davis declined to comment, and Mr. Cline couldn’t be reached for comment.

Who Wants to Buy a Coal Mine?

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