Alpha Natural Resources
Encyclopedia
Alpha Natural Resources is a large American producer of metallurgical and thermal coal. It also provides services relating to equipment repairs, road construction and logistics (terminals). It doesn't produce all of the coal it sells, some is purchased and resold. Alpha operates in Virginia
, West Virginia
, Kentucky
, Wyoming, Utah, Illinois, Tennessee, and Pennsylvania
. Clients include electricity producers
and steel manufacturers
(metallurgical coal
is used industrially while thermal is the form of coal used to generate power). The 2009 takeover of Foundation Coal also gave it the Cumberland Mine Railroad
to transport coal in Pennsylvania.
On January 31, 2011 Alpha Natural Resources acquired coal producer Massey Energy
for US$7.1 billion (to be completed mid year) creating the second biggest coal miner by market capitalization. The merged company (54% owned by Alpha Natural Resources) will be the leading producer of metallurgical coal
in the US and also have the second largest reserves of coal (5.1 billion tons). Merging operations with Massey is estimated to reduce combined operating costs by $150 million. 7,000 of the 14,000 employees are in West Virginia. In 2010 demand for thermal coal rose while metallurgical coal demand was flat (made up only 14% of coal sales down from 17% in 2009).
and Alpha Natural Resources, Inc.) and another January 31, 2011 (US$7.1 billion acquisition of Massey Energy). The takeover of Foundation Coal was a reverse takeover
in that Foundation Coal was the company left standing and it was immediately renamed Alpha Natural Resources. Foundation Coal added 7.5 million tons of annual coal shipments to its Eastern Coal operations and expanded the company's presence in Wyoming. Although acquisitions helped Alpha expand rapidly since its founding in 2002, it burdened it with lots of debt ($185.6 million in 2004, $754.15 Dec. 31, 2010). Massey Energy became a takeover target after suffering large income losses and negative publicity following an explosion at West Virginia's Upper Big Branch mine
that killed 29 employees (direct costs related to the incident amounted to $128.9 million). Federal regulators and the Mine Safety and Health Administration blamed the explosion on Massey's poor practices however the company contested the findings citing a methane leak.
The takeover of Massey Energy was completed in June 2011 after shareholders of both companies voted for the merger (99% of Massey shareholders voted for the deal (77% of them voted) while 98% of Alpha's shareholders supported it (83% of them voted). Alpha secured $3.3 billion in financing for the takeover from Citigroup and JPMorgan. The combined entity will be the world's number three producer of metallurgical coal behind BHP Billiton
and Teck Resources.
Stockholders (though it officially incorporated in November 2004). Around the same time it made its first major acquisition, The Brink's Company
's Virginian coal business for $62.9 million (Virginia is currently a significant source of primary production). Immediately after that it took over Coastal Coal Company (Jan 2003) followed by American Metals and Coal International's coal business (March) and Mears Enterprises, Inc (November).
In December 2004 it filed for an IPO in an attempt to raise US$250 million to repay debt (strong coal prices also affected the timing of it). At the time coal was selling for about a quarter the price of natural gas ($1.5 versus $5.0 per million BTU) however since then (mid 2010) the ratio has become much smaller (coal has tripled in price to $4.63/mil BTU
while gas is still at $5.189). (natural gas is used as an alternative to thermal coal in electricity production).
(53% = 49.2mt) was home to only 32% of coal reserves (behind U.S. Northern Appalachia (35% = 800mt) and Central Appalachia (32%, thermal coal). After the merger with Massey the company will control 150 coal mines and 40 preparation plants which is up significantly from the 65 mines under its control at the end of 2007. For 2011 Massey expects to ship 10 to 14 million tons of metallurgical coal, about the same as Alpha (in 2010 was 11.88 million tons or 14% of total production). In its last annual report (2009) Massey Energy reported coal sales of 38 million tons (ranking sixth in the USA), that compares to 84.8 million tons sold by Alpha Natural Resources in 2010. In the fourth quarter of 2010 Massey Energy had a coal shipment shortfall of 1.4 million tons half of which was due to rail problems the other half a result of misproduction.
A lot of the current increase in coal prices (gives miners more incentive to expand operations) is due to higher demand in Asia where coal fuels steel mills and power plants.
and Eagle Butte Mine
(both in Wyoming).
(also mines in Appalachia
and West Virginia).
Virginia
The Commonwealth of Virginia , is a U.S. state on the Atlantic Coast of the Southern United States. Virginia is nicknamed the "Old Dominion" and sometimes the "Mother of Presidents" after the eight U.S. presidents born there...
, West Virginia
West Virginia
West Virginia is a state in the Appalachian and Southeastern regions of the United States, bordered by Virginia to the southeast, Kentucky to the southwest, Ohio to the northwest, Pennsylvania to the northeast and Maryland to the east...
, Kentucky
Kentucky
The Commonwealth of Kentucky is a state located in the East Central United States of America. As classified by the United States Census Bureau, Kentucky is a Southern state, more specifically in the East South Central region. Kentucky is one of four U.S. states constituted as a commonwealth...
, Wyoming, Utah, Illinois, Tennessee, and Pennsylvania
Pennsylvania
The Commonwealth of Pennsylvania is a U.S. state that is located in the Northeastern and Mid-Atlantic regions of the United States. The state borders Delaware and Maryland to the south, West Virginia to the southwest, Ohio to the west, New York and Ontario, Canada, to the north, and New Jersey to...
. Clients include electricity producers
Electricity generation
Electricity generation is the process of generating electric energy from other forms of energy.The fundamental principles of electricity generation were discovered during the 1820s and early 1830s by the British scientist Michael Faraday...
and steel manufacturers
Steelmaking
Steelmaking is the second step in producing steel from iron ore. In this stage, impurities such as sulfur, phosphorus, and excess carbon are removed from the raw iron, and alloying elements such as manganese, nickel, chromium and vanadium are added to produce the exact steel required.-Older...
(metallurgical coal
Coal
Coal is a combustible black or brownish-black sedimentary rock usually occurring in rock strata in layers or veins called coal beds or coal seams. The harder forms, such as anthracite coal, can be regarded as metamorphic rock because of later exposure to elevated temperature and pressure...
is used industrially while thermal is the form of coal used to generate power). The 2009 takeover of Foundation Coal also gave it the Cumberland Mine Railroad
Cumberland mine railroad
The Cumberland Mine Railroad ia a private carrier railroad operating at the Cumberland Mine near Waynesburg, Pennsylvania. The railroad is owned by Foundation Coal and transports coal to a barge dock on the Monongahela River. It is an isolated railroad, not connected to the North American railroad...
to transport coal in Pennsylvania.
On January 31, 2011 Alpha Natural Resources acquired coal producer Massey Energy
Massey Energy
Massey Energy Company was a coal extractor in the United States with substantial operations in West Virginia, Kentucky and Virginia. By revenue, it was the fourth largest producer of coal in the United States and the largest coal producer in Central Appalachia...
for US$7.1 billion (to be completed mid year) creating the second biggest coal miner by market capitalization. The merged company (54% owned by Alpha Natural Resources) will be the leading producer of metallurgical coal
Coal
Coal is a combustible black or brownish-black sedimentary rock usually occurring in rock strata in layers or veins called coal beds or coal seams. The harder forms, such as anthracite coal, can be regarded as metamorphic rock because of later exposure to elevated temperature and pressure...
in the US and also have the second largest reserves of coal (5.1 billion tons). Merging operations with Massey is estimated to reduce combined operating costs by $150 million. 7,000 of the 14,000 employees are in West Virginia. In 2010 demand for thermal coal rose while metallurgical coal demand was flat (made up only 14% of coal sales down from 17% in 2009).
History
The company as it exists today is the result of two mergers, one in July 2009 (Foundation CoalFoundation Coal
Foundation Coal Holdings, Inc. was a large American coal mining company. Until its July 31, 2009 merger with Alpha Natural Resources to form the third largest American coal company, the company was publicly traded on the New York Stock Exchange under the symbol FCL...
and Alpha Natural Resources, Inc.) and another January 31, 2011 (US$7.1 billion acquisition of Massey Energy). The takeover of Foundation Coal was a reverse takeover
Reverse takeover
A reverse takeover or reverse merger is the acquisition of a public company by a private company so that the private company can bypass the lengthy and complex process of going public...
in that Foundation Coal was the company left standing and it was immediately renamed Alpha Natural Resources. Foundation Coal added 7.5 million tons of annual coal shipments to its Eastern Coal operations and expanded the company's presence in Wyoming. Although acquisitions helped Alpha expand rapidly since its founding in 2002, it burdened it with lots of debt ($185.6 million in 2004, $754.15 Dec. 31, 2010). Massey Energy became a takeover target after suffering large income losses and negative publicity following an explosion at West Virginia's Upper Big Branch mine
Upper Big Branch Mine disaster
The Upper Big Branch Mine disaster occurred on April 5, 2010 about underground in Raleigh County, West Virginia at Massey Energy's Upper Big Branch coal mine located in Montcoal . Twenty-nine out of thirty-one miners at the site were killed. The explosion occurred at 3:27 pm...
that killed 29 employees (direct costs related to the incident amounted to $128.9 million). Federal regulators and the Mine Safety and Health Administration blamed the explosion on Massey's poor practices however the company contested the findings citing a methane leak.
The takeover of Massey Energy was completed in June 2011 after shareholders of both companies voted for the merger (99% of Massey shareholders voted for the deal (77% of them voted) while 98% of Alpha's shareholders supported it (83% of them voted). Alpha secured $3.3 billion in financing for the takeover from Citigroup and JPMorgan. The combined entity will be the world's number three producer of metallurgical coal behind BHP Billiton
BHP Billiton
BHP Billiton is a global mining, oil and gas company headquartered in Melbourne, Australia and with a major management office in London, United Kingdom...
and Teck Resources.
Alpha Natural Resources, Inc
Alpha was first established in 2002 by management (original CEO Michael Quillen played a major role) and First ReserveFirst Reserve Corporation
First Reserve Corporation is a private equity firm specializing in leveraged buyouts and growth capital investments in the energy sector. First Reserve was founded in 1984 and is the oldest private equity dedicated to investments in the energy sector.....
Stockholders (though it officially incorporated in November 2004). Around the same time it made its first major acquisition, The Brink's Company
The Brink's Company
The Brink's Company is a security and protection company headquartered in Richmond, Virginia, United States. Its core business is Brink’s, Incorporated; it spun off its Brink’s Home Security operations into a separate company in 2008. In 2005, the company reported a total of 54,000 employees and...
's Virginian coal business for $62.9 million (Virginia is currently a significant source of primary production). Immediately after that it took over Coastal Coal Company (Jan 2003) followed by American Metals and Coal International's coal business (March) and Mears Enterprises, Inc (November).
In December 2004 it filed for an IPO in an attempt to raise US$250 million to repay debt (strong coal prices also affected the timing of it). At the time coal was selling for about a quarter the price of natural gas ($1.5 versus $5.0 per million BTU) however since then (mid 2010) the ratio has become much smaller (coal has tripled in price to $4.63/mil BTU
British thermal unit
The British thermal unit is a traditional unit of energy equal to about 1055 joules. It is approximately the amount of energy needed to heat of water, which is exactly one tenth of a UK gallon or about 0.1198 US gallons, from 39°F to 40°F...
while gas is still at $5.189). (natural gas is used as an alternative to thermal coal in electricity production).
Operations
Only about 40% of coal is produced directly by the company, 60% comes from subsidiaries. Nearly half of the mines are underground operations. In 2008 the biggest source of coal production, the Powder River BasinPowder River Basin
The Powder River Basin is a geologic region in southeast Montana and northeast Wyoming, about east to west and north to south, known for its coal deposits. The region supplies about 40 percent of coal in the United States. It is both a topographic drainage and geologic structural basin...
(53% = 49.2mt) was home to only 32% of coal reserves (behind U.S. Northern Appalachia (35% = 800mt) and Central Appalachia (32%, thermal coal). After the merger with Massey the company will control 150 coal mines and 40 preparation plants which is up significantly from the 65 mines under its control at the end of 2007. For 2011 Massey expects to ship 10 to 14 million tons of metallurgical coal, about the same as Alpha (in 2010 was 11.88 million tons or 14% of total production). In its last annual report (2009) Massey Energy reported coal sales of 38 million tons (ranking sixth in the USA), that compares to 84.8 million tons sold by Alpha Natural Resources in 2010. In the fourth quarter of 2010 Massey Energy had a coal shipment shortfall of 1.4 million tons half of which was due to rail problems the other half a result of misproduction.
A lot of the current increase in coal prices (gives miners more incentive to expand operations) is due to higher demand in Asia where coal fuels steel mills and power plants.
Mines
Before the merger with Massey Energy Alpha Natural Resources had over 60 active mines in 4 US states. After the merger the number of mines will reach 110-150. Notable ones include Belle Ayr MineBelle Ayr Mine
-Overview:The Belle Ayr mine is a coal mine located 18 miles southeast of Gillette, Wyoming in the United States in the coal-rich Powder River Basin. The mine is an open pit, "truck and shovel", mine producing a low-sulfur, sub-bituminous coal from the Wyodak-Anderson seam that is used for domestic...
and Eagle Butte Mine
Eagle Butte Mine
The Eagle Butte mine is a coal mine located north of Gillette, Wyoming in the United States in the coal-rich Powder River Basin. The mine is an open pit, "truck and shovel", mine producing a low-sulfur, sub-bituminous coal from the Roland and Smith seams that is used for domestic energy...
(both in Wyoming).
- Black Bear Surface Mines (previously operated but more recently is one of the company's two land restorationLand restorationLand restoration, also known as land reclamation is the process to restore an area to a more natural state. It is usually the consequences of pollution, deforestation or salination that have made land unusable.-Repairing damaged land:...
projects, the project was featured on the discovery channelDiscovery ChannelDiscovery Channel is an American satellite and cable specialty channel , founded by John Hendricks and distributed by Discovery Communications. It is a publicly traded company run by CEO David Zaslav...
).
Competition
Cliffs Natural Resources (coal producer of comparable size) and Patriot Coal CorporationPatriot Coal Corporation
Patriot Coal Corporation is a coal-mining company based in St. Louis, Missouri. The company is a spin-off of most of the Eastern U.S.A. operations of Peabody Energy....
(also mines in Appalachia
Appalachia
Appalachia is a term used to describe a cultural region in the eastern United States that stretches from the Southern Tier of New York state to northern Alabama, Mississippi, and Georgia. While the Appalachian Mountains stretch from Belle Isle in Canada to Cheaha Mountain in the U.S...
and West Virginia).
See Also
- Pittston Coal strikePittston Coal strikeThe Pittston Coal strike was a United States labor union action led by the United Mine Workers Union against the Pittston Coal Company, nationally headquartered in Pittston, Pennsylvania. The strike, which lasted from April 5, 1989 to February 20, 1990, resulted from Pittston's termination of...
- Pittson Coal, which used to be the seventh largest US coal producer (1987) contracted in size substantially since a strike in 1990 by employees. In 2002 Alpha Natural Resources purchased what remained of its coal business.