The portfolio of coal from Massey Energy Co has received a boost after the company this week signed an agreement to buy Cumberland Resources Corp. In a combination of cash and securities transactions, Massey will pay 960 million U.S. dollars U.S. for the coal producer east of U.S. and its affiliated companies. Under the agreement, Massey paid two thirds of the total valuation in cash and one third in shares.
Massey believes it will achieve operating synergies when this transaction and the integration of Cumberland operations are complete.
Cumberland mainly operates underground mines in southwestern Virginia and eastern Kentucky. Its assets include reserves of 416Mt of coal preparation plants in Kentucky and Virginia. Much of Massey coal mining currently takes place in opencast mines.
Recognized as one of the largest privately owned coal producers in the U.S., Cumberland generated U.S. $ 550 million and sold 7.8Mt in 2009.
Massey, CEO and President Don Blankenship said, “We believe this acquisition is an excellent team. Our analysis shows an increase in earnings per share from this year, and we believe will add significant shareholder value” .
“The trajectory of Cumberland in the production of low cost, focus on underground mining and liabilities inherited low are consistent with the history of Massey and strategy.
Massey said he expects to produce about 5MT / a quality metallurgical coal assets of Cumberland, but does not require any additional capital for development to reach this figure.
In late December 2009, had about 8.1Mt of coal Cumberland committed to the sale this year, mainly thermal coal customers.
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