Alpha and Massey Energy were fierce competitors, especially in Appalachia. Aside from coal sales, they were competing for manpower as well as attention from prospective investors. Management styles differed and many of Massey’s actions would be considered contrarian. There was one area, however, where both companies shared common ground: investing in a region that desperately needed jobs when other coal companies were pulling up stakes. Massey stuck to its guns, building reserves and advancing projects in Appalachia. Alpha did too, but it diversified, buying and merging the Foundation mines into its mix. Alpha built a respectable portfolio of both steam and metallurgical coal.

The decision to buy Massey makes sense on paper. Massey and Alpha operate a lot of mines in Appalachia and many share boundaries. The merger would capitalize on economies of scale, especially with the processing, blending and transportation networks. Massey also has metallurgical coal production and a great set of high quality reserves. That would be the low hanging fruit. Alpha learned a lot during the Foundation merger, but this will not be as smooth. Foundation had a handful of much larger mines. Massey Energy also operates several mountaintop mines. While Alpha will approach environmental groups differently, permitting and operating these mines will be difficult and costly.

The Massey mines will also have to adopt the Alpha “Running Right” program. This is a noble undertaking that will add to operating costs. The Massey mines will benefit by association with the Alpha training programs, but it will be a process that takes time. Another article on training this month (See Operating Ideas, p. 46) delves into the difficulties of change. Most miners, management and hourly hands, want to do the right thing and the Running Right program will take internal improvement efforts at Massey to a new plateau.

Massey and Alpha will also have to eventually deal with the UBB explosion. MSHA investigators have collected evidence from the UBB explosion they believe proves the longwall was not running right. A photo is worth a thousand words. Compare the sprays on the UBB shearer (p. 24) and the shearing machine on the cover of this magazine and readers will notice an obvious, stark difference. While neither company will discuss plans during an active investigation, Alpha obviously believes through due diligence that Massey has developed a viable contingency plan to deal with the situation.

If and when the deal is completed, Alpha will have options. It will be ranked third in the U.S. and it will be a true global player in met markets. The company will be in a prime position when domestic steam coal markets improve. Even Massey’s foes, organized labor and environmental activists, begrudgingly admit the deal would be good. Alpha and Massey are uniquely positioned to create a company that would be more successful together than they would be individually.

 

Steve Fiscor, Coal Age Editor-In-Chief
sfiscor@mining-media.com