“The acquisition of ICG is a significant strategic step that strengthens Arch’s position as a world-class, global coal franchise positioned for growth,” said Steve Leer, chairman and CEO, Arch Coal. “This transaction will greatly expand our participation in global met markets; provide a powerful platform for future organic met coal production growth; enhance and further diversify our met and thermal coal product slate; extend our operating portfolio into every major U.S. coal-producing basin; and solidify our position as one of the industry’s lowest cost producers.”
“ICG has assembled a high-quality portfolio of low-cost mining operations and reserves, and one of the industry’s most talented and productive workforces,” said Ben Hatfield, president and CEO, ICG. “By teaming up with Arch, we expect to realize tremendous value for the shareholders of both companies while ensuring that our operations achieve their full potential.” Based on pro forma 2010 financial results, the combined company would have total shipments of 179 million tons of coal, $4.3 billion in revenues and $925 million of adjusted EBITDA, with a balanced split of 50% of earnings generated from eastern operations and 50% from western operations.
Arch expects 2011 pro forma metallurgical coal sales to reach 11 million tons. Over the next three years, Arch anticipates met coal volumes from the combined operations to expand to more than 14 million tons per year, with further opportunities for revenue growth emerging from significant blending opportunities between ICG’s low-volatile and rank A high-volatile met coals and Arch’s existing rank B high-volatile met products.
“The combination with ICG creates a highly effective platform for optimizing the value of the combined company’s met product slate, and for creating entirely new synthetic blends of mid-volatile met coals that command a significant premium in the global market,” said John Eaves, president and COO, Arch Coal. “In addition, ICG’s Tygart Valley No. 1 met mine, which is currently under development and expected to come online in early 2014, promises a compelling strategic growth opportunity.” ICG’s predominantly underground reserve base of 1.1 billion tons, nearly 30% of which is met quality, provides significant additional opportunities for future coal volume growth.
In total, the combined company will have the industry’s second largest U.S. reserve position, with 5.5 billion tons. ICG’s assets include 13 active mining complexes—and one major mining complex under development—across three coal basins.
