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Struggling coal miners buy more time as asset sales continue to sweep sector


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Struggling coal miners buy more time as asset sales continue to sweep sector

A fewof the remaining publicly traded U.S. coal miners bought more time from lendersand others this week to avoid ending up in bankruptcy court. Meanwhile, some oftheir peers continue to divest assets either in bankruptcy court or out of it.

, the nation'slargest coal producer, disclosedMarch 31 that it extended the closing of a deadline for a proposed asset sale thatcould help keep it out of bankruptcy court. Earlier in the week Illinois Basin producerForesight Energy LP, whichis operating without oneof its most productive mines, extendedongoing negotiations with its bondholders in hopes of doing the same.

Foresight'sextension runs through April 5, while Peabody's extension pushes the seller's terminationrights to April 7 and the buyer's termination rights to April 15.

Peabodyhas been reining in costs to weather the market downturn and this week it was laying off 235 hourlyand salary employees at its North Antelope Rochelle mine in the Powder River Basin.And Arch Coal Inc., thesecond largest U.S. producer said it is reducingstaff at its Black Thunder mine by 15%. Black Thunder is also in the PRB. Layoffsin the PRB, known for its low-cost production, are a sign to many industry observersthat no producer is immune from the widespread market weakness.

Thisweek Arch Coal also got an extensionfrom a U.S. bankruptcy court to file its reorganization plan.

Meanwhile,producers continue to shed assets at what some say are rock bottom prices. on the sale of its core Alabama metallurgicalcoal assets to a group of senior lenders in a bankruptcy transaction. It is stilllooking to sell its Canadianand U.K. operations.

And coaland natural gas producer CONSOL EnergyInc. continued to divest coal assets with the closure this week of the sale of its Buchanan met coal mine.

Takingthe contrarian approach is a company called RoyalEnergy Resources Inc., whose executive spoke to S&P Global MarketIntelligence about the incredible amount of coal projects available now and howthe company is taking advantageof that.

Againstthe current market backdropof increasing regulation,slack demand and plungingdomestic coal deliveries, there's no reason to doubt the executive's observationthat it truly is a buyer's market for coal assets.

Still,even those few willing to bet big on a coal market recovery are likely to find itdifficult to secure financing for coal assets. The capital market has been pretty selective as to which coal companies it is opening its doorfor lately, but a few investors think that may change down the road as the marketcontinues to work out what a restructured, stabilized coal market looks like.

Regardlessof ownership, the restructured market is likely to have a much small unionized workforceas many coal producers have been looking to shed collective bargaining agreementsin bankruptcy court. This week AlphaNatural Resources Inc. soughtto do so. Meanwhile, the United Mine Workers of America said it was "firedup" at the widespread loss of member benefits and staged a rally in southwest Pennsylvania.