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Mine Closures

Blackjewel's Eagle Butte coal mine is covered by dense clouds on July 2 near Gillette. The company closed its Eagle Butte and Belle Ayr mines without warning earlier this month and is now soliciting interest from buyers who might be interested in its assets.

Bankrupt coal operator Blackjewel LLC is actively soliciting interest from potential buyers for its assets throughout the country, according to a status report filed Tuesday afternoon with the court. The latest update signals the possibility that the company has abandoned its initial goal to fully reopen multiple idling mines and bring back the majority of workers. The company has yet to obtain necessary short- or long-term funding needed to resuscitate its coal mines, court documents stated.

Blackjewel said it contacted more than 20 buyers to explore potential sales and was actively in conversation with eight parties who are “conducting due diligence” and have signed non-disclosure agreements.

“While the Debtors have not finalized the sale terms for the various stalking horse bids being negotiated, the parties with which the Debtors are engaged have expressed interest in assets in the Debtors’ eastern and western operations,” attorneys for Blackjewel stated in the report.

To Shannon Anderson, a staff attorney for the Powder River Basin Resource Council, Blackjewel may have moved to a stage in the bankruptcy process where it attempts to sell assets and search for the funding needed to keep the company operating through that process.

“Blackjewel might have recognized: ‘We’re not getting enough money to restart the company, and at this point it might be a lost cause,’” she said. “But with these mines being shut down, it will be really hard to market them to anyone.”

Shifting goals

Blackjewel closed Wyoming’s Eagle Butte and Belle Ayr coal mines — the nation’s fourth and sixth largest by production — on July 1, after a previous lender had withdrawn during the company’s Chapter 11 bankruptcy financing. Hundreds of workers suddenly were out of work 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 to the company to make an insurance payment and settle past-due wages with current employees.

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.

In a July 5 statement from Blackjewel, the company assured the court and workers it was scrambling to bring the mines back to full operation.

“To be perfectly clear: The company is fully committed to securing the additional financing necessary to resume normal operations and to bring our employees back to work as quickly as possible,” attorneys stated in court documents submitted within days of the mine closures.

But the status report filed Tuesday suggested the company might be revising that plan, as attorneys continue to hit dead ends on financing options.

Representatives for Blackjewel did not immediately return requests for comment.

“The Debtors’ goal is to seek to arrange an expedited sale process intended to maximize the value of their assets for the benefit of the estates and their creditors and, to the greatest extent reasonably possible, to allow more employees to return to work,” the status report said.

In the latest report, Blackejwel no longer explicitly committed to resuming all normal operations on its mines, said Clark Williams-Derry, director of energy finance at the Sightline Institute, a think tank in Seattle that advocates a transition to green energy.

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The report signaled the possibility that Blackjewel no longer considers its previous goal a viable option, he added. Instead, the report shifts to focusing on conducting a bankruptcy sale that benefits the estates and their creditors, while also returning more employees to work.

“They are also not saying ‘all’ employees; they are just saying ‘more,’” Williams-Derry said. “I think that it is a clear signal that Blackjewel workers can expect to see Blackjewel trim its workforce. But we don’t know for sure.”

The assets that can be collected throughout the bankruptcy sale will be distributed to creditors Blackjewel owes money to. But not all creditors are treated equally. For instance, secured creditors trump unsecured debtor-in-possession lenders. And those lenders supersede any workers waiting for their post- or -pre-petition wages.

Multiple bidders

Blackjewel attorneys may be looking for multiple bids, not just one, Williams-Derry added.

Two investment firms — Whitebox Advisors LLC and Highbridge Capital Management — came forward as new junior DIP lenders to Blackjewel on July 19, each providing the company with $1.45 million in short-term funding.

Both companies hold a stake in the coal company Contura Energy, the former owner of Blackjewel’s Wyoming mines. Contura Energy still holds the permits for the two mines and therefore the steep costs of reclamation if the mines are abandoned or closed for good.

Although the two firms might be interested in the western mines because of their stake in Contura Energy, other bidders may be interested in the mines speckled throughout West Virginia, Kentucky and Virginia, Williams-Derry said.

“I would say that this filing signals that Blackjewel is anticipating it may be split apart into bankruptcy,” he said. “... What is interesting about this filing is what is unsaid; you are reading tea leaves. It’s not entirely clear.”

The company plans to file additional motions to the federal court by the end of this week.

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