Massey Energy intends to purchase Cumberland Resources Corp. and its affiliated companies for $960 million in a combined cash and stock transaction. Cumberland is one of the largest privately held U.S. coal producers. In 2009, Cumberland Resources generated $550 million based on the production and sale of 7.8 million tons of high quality Central Appalachian coal.
Based in Abingdon, Va., Cumberland operates primarily underground coal mines in Southwestern Virginia and Eastern Kentucky. 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 (216 million tons) have metallurgical coal qualities.
Cumberland Resources’ existing operations currently produce both steam and metallurgical quality coals. Massey expects to be able to produce approximately 5 million tons of metallurgical quality coal annually with the existing Cumberland assets. At the end of 2009, Cumberland had approximately 8.1 million tons of coal committed and priced for sale in 2010, primarily with thermal coal customers. On a pro-forma basis, after adding the Cumberland reserves, Massey will have an estimated total reserve base of 2.9 billion tons. An estimated 1.3 billion tons of Massey’s total coal reserves are of metallurgical quality.