Two idling Wyoming coal mines owned by Blackjewel could reopen to full capacity and bring back hundreds of out-of-work employees after a former owner offered Thursday to buy back the mines and provide immediate funding throughout the sales process.
Contura Energy offered to pay $20.6 million for bankrupt coal operator Blackjewel’s two Wyoming mines — Eagle Butte and Belle Ayr — along with Pax Surface Mine in West Virginia, according to a motion submitted to a federal court Thursday morning. If approved, the deal could return as many as 700 workers to the three mines for the next six to 12 years, Blackjewel attorneys stated in court documents.
As the stalking horse bidder, Contura Energy set the minimum price for the auction, guaranteeing that if the sale proceeds, there is at least one buyer. But other interested companies also have the opportunity to submit higher bids.
The deal also hinges on the approval from a federal bankruptcy judge, who considered the matter Thursday afternoon but did not make an immediate decision. Court proceedings are set to resume Friday.
“After weeks of negotiations with many of the Debtors’ stakeholders ... the Debtors have now secured the best outcome possible under these circumstances, to the benefit of all stakeholders and employees of the Debtors, with the help and support of Contura,” Blackjewel attorneys stated in court documents.
According to a budget dated Tuesday and submitted to the court by Blackjewel attorneys, the company projected it would have a $5.5 million deficit by Sunday. During Thursday’s hearing, an attorney for the company said Blackjewel would run out of financing by day’s end.
Prior owner’s bid
Contura agreed to extend an immediate deposit to the cash-strapped company to fund its remaining expenses as the sale progresses. As a condition of the agreement, Contura would not assume responsibility of Blackjewel’s employee retirement plan, effectively terminating the plan if the judge approves.
Contura still holds the permits for the Eagle Butte and Belle Ayr mines, despite having sold the mines to Blackjewel in December 2017. Contura is therefore still on the hook for the steep costs of reclamation if the mines are abandoned or closed for good.
In a press release published Tuesday morning, Contura said it plans to immediately provide Blackjewel with an $8.1 million purchase deposit “to be used to facilitate an orderly asset sale process, as well as cover the Debtor’s near-term working capital needs and general corporate expenses.”
If no additional companies submit bids for the three mines, Contura will pay an additional $12.5 million in cash for assets, according to the company statement.
“Contura’s divestment of these (Powder River Basin) assets over a year and a half ago was a strategic decision to focus on our met-heavy eastern asset base, and while that remains our strategic focus, our considerations changed when Blackjewel declared bankruptcy,” Andy Eidson, interim co-chief executive officer of Contura, said. “Absent another qualified purchaser for the assets, we have determined that the most prudent path forward is to reacquire these mines to reestablish operations, resume safe and responsible coal production, and bring hundreds of miners back to work.”
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If the parties finalize the agreement, Contura would assume none of Blackjewel’s liabilities, except for the nearly $250 million in reclamation obligations associated with the permits Contura already holds for the Powder River Basin mines.
In a statement, the Powder River Basin Resource Council stressed the need for state officials to ensure that Contura is responsible for paying any unpaid taxes and addressing environmental and safety issues at the mines.
“On one hand we are relieved that Contura Coal West will remain on the hook and the responsible party for the Eagle Butte and Belle Ayr mines, but on the other hand, there are still significantly large concerns,” chair Joyce Evans said in the statement. “The state of Wyoming and the Department of Interior should demand that Contura pay all unpaid county taxes, federal royalties, as well as the employee benefits and taxes before the transfer of federal leases from Blackjewel to Contura. We must ensure that any band-aid solutions require Contura to meet these minimal obligations.
“The state must step up its efforts to ensure Contura addresses all environmental and safety issues at these mines because we believe they will face another bankruptcy in the near future due to the reality that these mines are uneconomic. Wyoming needs to assert itself when it comes to taxes owed by these companies as it’s imperative they pay their fair share.”
Search for financing
Blackjewel closed its Wyoming mines on July 1, after a previous lender had withdrawn during the company’s Chapter 11 bankruptcy financing. Hundreds of workers found themselves suddenly without work or pay as the mines idled.
A federal judge approved $2.9 million in short-term funding for Blackjewel during an emergency hearing on July 19. But the loan was not enough to bring the company’s mines back to full capacity and only provided enough relief for the company to make an insurance payment and settle past-due wages with current employees.
Two investment firms — Whitebox Advisors LLC and Highbridge Capital Management — came forward as new junior debtor-in-possession lenders for Blackjewel on July 19, each providing the company with $1.45 million in short-term funding. Both companies hold a stake in Contura.
Since the bankruptcy announcement, only about 140 employees have been brought back nationwide for minimal maintenance and shipment of coal produced before the closures. The mines are not producing new coal at this time.
The fate of the rest of the company’s mines remains in question, leaving hundreds of workers in West Virginia, Virginia and Kentucky largely in the dark.
Contura has assumed the role of stalking horse purchaser before when it submitted a bid to acquire the same two Wyoming mines in 2015 from the then-bankrupt coal company Alpha Natural Resources. It owned and operated the mines for about two years before transferring them to Blackjewel.
For the past month, Blackjewel attorneys have scrambled to secure needed financing from lenders to keep the company from sliding into liquidity or abandoning the mines.
“Without Contura’s offer to purchase the Western Purchased Assets and Pax Purchase Assets and fund the Debtors’ expenses during sale process by pre-funding the purchase price, the Debtors would be out of options, would immediately convert to chapter 7, and substantial value and jobs would be lost,” according to Blackjewel attorneys.