The number of shares to be offered and the price range for the offering had not been determined by late October by the private company formed in 2006 by management and Yorktown Partners to acquire and develop reserves in the IB. Raymond James & Associates and FBR Capital Markets and Co. are the underwriters.
The company refers to itself as Armstrong Coal on its website.
Armstrong, which operates seven mines in western Kentucky—four surface and three underground, as well as three prep plants—and controls 319 million tons of coal in the IB, said in a preliminary prospectus that the proceeds would be used to repay loans and borrowings. The company also would use some proceeds to fund mining-related capital expenditures.
Led by 70-year-old Hord Armstrong III, a former chief financial officer for Arch Mineral Corp., an Arch Coal predecessor, the company is the third moderately sized coal producer in the IB and Northern Appalachia to seek to go public during the past year and half. Both Oxford Resource Partners and Rhino Resource Partners went public in the U.S. in 2010.
In one IPO, Armstrong Energy seeks to raise up to $69 million. In the other, Armstrong Resource Partners, an affiliate, hopes to raise up to $22 million. Armstrong Resource Partners was formed in 2008 to manage and lease coal reserves. Armstrong Energy and Armstrong Resource Partners plan to list shares on the Nasdaq Global Market.
Armstrong Coal has enjoyed steady growth during the past several years, producing 5.6 million tons of coal in 2010. As of June 30, 2011, it had contracts to sell 8.3 million tons in 2012 and 7.6 million tons in 2013, those figures representing 93% and 78% of its expected coal sales for those two years, respectively. Armstrong posted a profit of $6.7 million on revenue of $220.6 million last year, according to the preliminary prospectus. Armstrong officials did not respond to requests for an interview about the IPO.
James Rollyson, a Raymond James analyst in Houston, said Armstrong may not actually go public soon, predicting the listing “would be more dependent on the market. The coal sector has had its pressure in the last couple of months. They don’t absolutely need to go public to have growth. But this is kind of what private equity-backed companies do.” Armstrong, he said, “has good growth going on. Some of the more recent coal they’ve leased up, if they ultimately develop that they might need additional capital.”
In September, Armstrong Coal started production at its newest mine—Kronos, a continuous miner operation in Ohio County, Ky. Kronos is expected to approach 3 million tons annually from the No. 9 seam at peak production. Earlier this year, production began at Armstrong’s new Lewis surface mine also in Ohio County.