The company announced Walter Natural Gas will acquire the Alabama natural gas interests of HighMount Exploration and Production for approximately $210 million in cash. “Acquisition of these gas assets is extremely important to Walter Energy’s coal production growth strategy, helping to ensure that future coal production areas are properly degasified, thereby improving safety and operational efficiency,” said Walter Energy President and COO George R. Richmond. “In addition, on a stand-alone basis, the assets provide long-life, low-cost production, stable cash flows and are complementary to our existing gas business.”
The acquisition includes HighMount’s Alabama coal bed methane operations, including approximately 1,300 existing conventional gas wells, pipeline infrastructure and related equipment located adjacent to the company’s existing underground mining and coal bed methane business located in Tuscaloosa County, Ala.
Walter Energy has signed a non-binding letter of intent to lease approximately 52 million tons of Blue Creek coking coal reserves in Tuscaloosa County and acquire the existing North River steam coal mine in Fayette County and Tuscaloosa County from Chevron Mining. “Chevron’s Blue Creek reserves are high-quality, high-vol coking coal and, if consummated, this acquisition gives us opportunities to blend this coal with coal from our No. 7 mine to make an outstanding hard coking coal product, similar to that from our No. 4 mine,” Richmond said.
“We are optimistic that we will be able to consummate this transaction in the near term,” said Leonard. “With this transaction, we are rapidly closing in on the last remaining reserves of coal from Alabama’s Blue Creek seam and some of the highest quality coking coal in the world.” The transaction with Chevron Mining is subject to a number of conditions and there can be no assurance whether or when this transaction will be completed, according to Walter Energy.
In a separate transaction, Walter Energy signed a letter of intent to lease approximately 22 million tons of Blue Creek coking coal reserves, which are adjacent to the Chevron reserves and are of similar quality. Terms of the lease, according to the company, including royalty rates, are consistent with existing lease agreements. These reserves are just to the north of the 32 million tons of reserves the company leased in late 2008.
The company also announced Walter Minerals’ Reid School mine would begin production in May 2010. The mine has approximately 600,000 tons of high quality, high-vol coking coal reserves and is expected to produce 200,000 tons of annual production over the next three years. Approximately half of the production will be used by Walter Coke and the remainder will be sold in the open market. The Reid School mine is
located in Blount County, Ala., and will employ approximately 45 people.