ARCHIVE

Bowie's takeover of Canyon Fuel complete

ARCH Coal and Bowie Resources announced that the sale of Arch's Canyon Fuel subsidiary - which includes the prolific Dugout, Sufco and Skyline operations - has been completed.

Donna Schmidt
Bowie's takeover of Canyon Fuel complete

The $423 million cash transaction first announced in late June also includes 105 million tons of bituminous coal reserves in Utah.

Bowie, which made the acquisition as a joint venture with Galena Private Equity Resource Fund, will now be known as Bowie Resource Partners.

Arch will retain ownership of the West Elk mine in Colorado and about 300Mt of bituminous reserves in the Western Bituminous Region, including the Saddleback Hills and Elk Mountain reserves in southeastern Wyoming.

“The sale of our Utah operations is advantageous for Arch and our shareholders, allowing us to monetize assets in our portfolio that aren't core to our long-term strategic plans," Arch president and chief executive officer John Eaves said.

“We are pleased with the value this transaction creates, as the sale puts Arch in a strong position for an evolving domestic coal market.”

Arch, in addition to the sale proceeds, said it would record pre-tax gains of about $120 million in the third quarter as a result of the sale, and it was also forecasting cumulative capital and administrative cost savings of more than $200 million from 2014 to 2017 because of the Utah asset divestiture.

The St Louis, Missouri-based producer also believes it can further streamline its operations and achieve $10 million more in annual administrative cost reductions going forward.

“This divestiture pulls forward multiple years of cash flows and reduces Arch's future capital and cost outlays,” Eaves said.

“Moreover, the sale of our Utah assets provides an incremental boost in liquidity, further enhancing our financial flexibility and positioning Arch for future debt reduction as coal markets rebound."

The executive noted the sale, which had streamlined its portfolio, helped shift Arch’s focus to its most value-enhancing business arms, such as building out and upgrading the Appalachian metallurgical coal platform and optimizing low-cost thermal coal franchises for the domestic and export markets.

Bowie said the combination of its assets with Canyon Fuel created a competitive coal producing company to serve the western US power generation industry and export markets via the US West Coast.

It said it would add about 25 staff at its Louisville, Kentucky office as a result of the deal.

“We’re delighted to have completed the purchase of Canyon Fuel Company and formed a significant new coal producer in a strategically advantageous location,” BRP chairman John Siegel said.

“Even as our industry is faced with certain domestic consumptive challenges, we believe we have a niche opportunity to grow our business significantly over the long-term, and we are excited about those prospects.”

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