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Contura announces agreement to transfer PRB mines to FM Coal affiliate

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Contura announces agreement to transfer PRB mines to FM Coal affiliate

Contura Energy Inc. announced Sept. 18 that it has entered into an agreement with an affiliate of FM Coal LLC interested in acquiring and operating the Eagle Butte and Belle Ayr coal mines in the Powder River Basin, a deal that may release Contura from all bonding, reclamation and operational liabilities pertaining to the mines.

Eagle Specialty Materials LLC is interested in the mines, which have been operated by now-bankrupt Blackjewel LLC , but whose mining permits still belong to Contura despite the company's attempts to transfer them to Blackjewel. Contura sold those assets to Blackjewel in 2017. Depending on the completion of agreements with private, governmental and interested parties, regulatory and legal approval, and the closing of certain covenants and conditions, Contura would be released from its liabilities to the mines.

"We've been clear that operating long-term in the PRB was not in Contura's strategic plans, and that the best possible outcome for all interested parties would be for another responsible operator to step up that was interested in doing just that," said chairman and CEO David Stetson in the release.

Contura and Eagle Specialty Materials "will use commercially reasonable efforts to enter into definitive agreements" with debtors, third-party sureties, governmental entities and other interested parties to complete the purchase and immediate operation of the Powder River Basin mines, the release states. This would include transferring state and federal permits and leases from Contura and Blackjewel to Eagle Specialty Materials, which would also replace Contura-held bonds on the mines.

"The debtors are not party to the agreement, and the sale of the two PRB mines to Eagle Specialty Materials is contingent upon Eagle Specialty Materials reaching agreement with the Debtors and other third parties regarding the terms of such sale and obtaining approval of the United States Bankruptcy Court for the Southern District of West Virginia," according to the release.

Contura plans to provide $90 million in cash and convey certain Wyoming real property to Eagle Specialty Materials; pay $13.5 million to Campbell County, Wyo., for back taxes; and waive its rights to the remaining nearly $3.1 million of the purchase deposit provided to the debtors. Eagle Specialty Materials will make specialized payments to Blackjewel, assume all reclamation obligations and certain other liabilities, as well as pay off some of Blackjewel's debts.

Contura expects to have $9 million in cash collateral returned to it related to posted bonds and to be released from remaining claims against the company regarding royalties, taxes and other fees associated with the mines.

The agreement is subject to approval from Contura's board of directors and from the federal bankruptcy court.

Blackjewel filed for bankruptcy protection in July and sent many of its miners home shortly thereafter without pay. Contura received court approval to purchase one of the company's eastern metallurgical coal operations separately from the two Powder River Basin mines in August until it wrapped up negotiations with the federal government regarding the western operations.