Engineering & Mining Journal

AUG 2017

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NEWS - THIS MONTH IN COAL 20 E&MJ • AUGUST 2017 www.e-mj.com Alpha to Transfer Idle Assets, Eliminate Self-bonding in West Virginia Alpha Natural Resources plans to pay Lexington Coal Co. (LCC) to take its idled assets. Included with these properties, which are located in Kentucky, Illinois, Tennessee and West Virginia, are approxi- mately 280 permits, substantial reclama- tion equipment, ongoing royalty payments associated with these properties and 100 million tons of reserves. While the spe- cifi c economic terms were not disclosed, LCC will receive approximately $204 mil- lion in cash at the time of closing and $112 million in installment payments to assist in the fulfi llment of bonding, reclamation, water treatment and other obligations associated with the conveyed properties and permits. Alpha CEO David Stetson said, "LCC has a decade-long history of reclaiming properties in a diligent and environmen- tally responsible manner, and Alpha is providing LCC with adequate resources to meet its obligations to the communities in which the properties are located." Alpha established a dedicated man- agement team to oversee its idle and non-active properties after emerging from bankruptcy and that team will take senior leadership positions in LCC at the time of closing. "The seamless transition of this management team, which knows the properties and permits and has a demon- strated track record of success, coupled with the conveyance of infrastructure and capital, will enable LCC to dedicate re- sources to accelerate the reclamation of the properties with less contingent expo- sure for the states," Stetson said. In addition to accelerating reclamation, the transaction will eliminate all remain- ing self-bonds in West Virginia. Prior to emerging from bankruptcy in July 2016, Alpha had approximately $250 million in self-bonding outstanding. Alpha and West Virginia regulators have worked to reduce that by more than $100 million over the past year. This transaction with LCC allows Alpha's self-bonds in West Virginia to be replaced nine years ahead of schedule. The closing is subject to various con- tingencies, including Alpha obtaining fi - nancing and entering into agreements with various state and federal regulatory agen- cies on the transfer of the permits. After closing, Alpha will continue to operate 19 mines and nine prep plants in West Virgin- ia, and the company still expects to pro- duce 14 million tons of metallurgical and thermal coal in 2017. The parties expect to close during the third quarter of 2017. CONSOL Files Plans to Spin Off Coal Business In mind-July, CONSOL Energy fi led the necessary paperwork with the U.S. Secu- rities and Exchange Commission (SEC) to split the company into two publicly trad- ed companies, a coal company and a nat- ural gas exploration and production (E&P) company. The spin-off would provide cur- rent shareholders ownership in two com- panies, each positioned to capitalize on distinct opportunities for future growth and profi tability, the company said. "Today's fi ling represents a signifi - cant step toward completing the compa- ny's separation, with both entities being well-capitalized and free cash fl ow gen- erating," said Nicholas J. DeIuliis, presi- dent and CEO. "This strategic separation will enable both businesses to focus on their inherent strengths and unlock value for their shareholders." The initial Form 10, which was fi led by CONSOL Mining Corp., a subsidiary of the company that will hold the coal business at the time of the spin-off, in- cludes detailed information about the coal business, including historical fi nan- cial information. The coal business will be comprised of the Pennsylvania Mining Complex, consisting of the Bailey mine, the Enlow Fork mine and the Harvey mine and the related coal preparation plant; the company's ownership interest in CNX Coal Resources LP, a publicly traded mas- ter limited partnership that owns a 25% undivided interest in the Pennsylvania Mining Complex; the coal export termi- nal at the Port of Baltimore; undeveloped coal reserves located in the Northern Appalachian, Central Appalachian and Illinois basins; and certain related coal assets and liabilities. The initial Form 10 is preliminary and subject to change. Jimmy Brock has been appointed as CEO of the coal business and Katharine Fredriksen as president of the coal busi- ness. David Khani will serve as CFO of the coal business and Don Rush, a cur- rent vice president of the company, will assume the role of executive vice presi- Alpha will continue to operate 19 mines and nine prep plants in West Virginia. (Continued on p. 22)

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