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Cliffs says coal asset buyer claiming it does not have $6M to pay


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Cliffs says coal asset buyer claiming it does not have $6M to pay

Cliffs Natural Resources Inc. is asking a judge to intervene in a dispute over $6 million with a conservationist who bought Cliffs' last coal mines.

A Dec. 20 complaint said Seneca Coal Resources LLC, owned by conservationist and health care executive Tom Clarke, failed to comply with its post-closing bonding requirements and to pay Cliffs. Now, Cliffs said it believes Seneca and its management plan to transfer Seneca assets to other entities, including Clarke, rather than paying Cliffs.

Cliffs is asking the court to intervene and prevent such a transfer before a planned "reorganization" of Seneca believed to be set for Dec. 31.

"Agents of Seneca have stated to Cliffs that Seneca does not have the funds to pay its debts to Cliffs," Cliffs wrote. "Despite these statements, defendants still plan to transfer Seneca's assets rather than pay the debts to Cliffs."

According to the complaint, Seneca has failed to replace bonds and failed to reimburse Cliffs for capital lease repayments, worker's compensation costs, medical out-of-pocket costs, bond premiums, payroll services and certain legal costs. Cliffs also alleged Seneca has failed to obtain workers' compensation insurance and replace certain letters of credit. In addition to at least $6 million in compensatory damages, Cliffs is seeking an order that Seneca replace letters of credit in the amount of $10.1 million that Cliffs has been required to pay on Seneca's behalf.

A motion for expedited discovery into the matter said Seneca may be planning to contribute to Clarke's purchase of assets from Magnetation LLC. Clarke made millions with a start in the health care industry and recently began buying coal mines.

Magnetation, an iron ore concentrate and pellet producer, was in the process of a bankruptcy reorganization, but the company said Clarke's ERP Compliant Fuels' purchase of the company would allow it to continue as an operating entity. Clarke told the Duluth (Minn.) News-Tribune earlier this month the plan was to get employment back to what it was before the company filed bankruptcy.

Clarke, also the president of Virginia Conservation Legacy Fund Inc., has bought coal mines from Walter Energy Inc. from its bankruptcy reorganization, Patriot Coal Corp. When it bought Patriot's assets, Clarke said his plan was to sell coal bundled with reforestation carbon credits in the hopes of helping utilities comply with the U.S. EPA's Clean Power Plan. That plan has been challenged in the courts and is threatened to be removed entirely by President-elect Donald Trump.

VCLF and other Clarke-affiliated companies have largely obtained coal assets from distressed companies in exchange for taking on millions in liabilities at the mines.

Recently, a medical staffing contractor sued VCLF for more than $200,000 in unpaid fees. A group of mine workers laid off by Seneca opened a class action complaint alleging the company failed to pay required wages.

Clarke did not immediately respond to a request for comment.