Cliffs Natural Resources sold the Pinnacle mine in West Virginia and Oak Grove mine in Alabama to Seneca Coal Resources. The $268 million deal is based on Seneca Coal assuming all liabilities. Additionally, Seneca Coal may pay Cliffs an earn-out of up to $50 million contingent upon the terms of a revenue sharing plan, which extends through the year 2020.
“The sale of Pinnacle and Oak Grove to Seneca Coal marks Cliffs’ exit from the coal business, and represents another very important step in the implementation of our U.S. iron ore pellet-centric, environmentally compliant strategy,” said Lourenco Goncalves, chairman, president and CEO of Cliffs. “We are pleased to have found a buyer that was able to agree on a transaction that not only brings real value to Cliffs shareholders, but will also preserve jobs for the exceptional people at these two mines.”
Both of the mines produce metallurgical coal and are former U.S. Steel assets that have changed hands over the years. Located near Pineville, the Pinnacle mine, formerly known as U.S. Steel No. 50 mine, operates the only plow longwall face in the U.S. The plow, as the name implies, shaves coal from a thin seam for the full length of the face as opposed to a shearing machine, which cuts coal from the face.
Seneca is affiliated with West Virginia-based ERP Compliant Fuels (ERP). The company plans to produce 4.4 million tons of metallurgical coal in 2016 and employ 811 people in West Virginia and Alabama. ERP is engaged in rebalancing the supply of domestic coal through the purchase, reclamation, and retirement of 135 mining permits in five states.
ERP is actively marketing the sale of “Compliant Fuel,” which bundles reforestation carbon credits with coal sales, to reduce the rate of growth in atmospheric carbon dioxide. With the Seneca purchase, ERP will operate three underground longwall mines, producing more than 8 million tons of thermal and metallurgical coal annually.