Engineering & Mining Journal

NOV 2017

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NEWS - THIS MONTH IN COAL 28 E&MJ • NOVEMBER 2017 www.e-mj.com MEC, Bowie Partner to Create Canyon Consolidated Resources Murray Energy Corp. (MEC), Bowie Re- source Partners, Javelin Global Commod- ities, and Grupo CLISA have agreed to form a strategic partnership called Can- yon Consolidated Resources (CCR), which will produce approximately 13 million tons per year (t/y) and own 214.8 million tons of coal reserves. CCR will combine the assets of Bow- ie, the marketing and logistics platform developed by Bowie, MEC's management and operational expertise and coal from MEC's Lila Canyon mine, and the coal marketing expertise of Javelin and CLISA to create a western U.S. bituminous coal producer and marketer. The partnership will operate three un- derground coal mines in Utah — the Sufco mine, which produced 5.4 million tons in 2016, the Skyline mine (4.5 million tons) and the Dugout Canyon mine (650,000 tons in 2016). The Lila Canyon mine pro- duced 1.6 million tons in 2016 and cur- rently has 42.3 million tons of coal reserves. MEC will hold a 30.5% stake in CCR. Chairman of Bowie John Siegel will also control 30.5%, and 28.5 % will be held by second lien lenders via warrants. Jav- elin and CLISA will control 7.25% and 2.25%, respectively. Javelin is headquar- tered in the U.K. and CLISA is a trading and investment group based in Mexico with a focus on the energy industry. CCR will purchase and market coal produced from Lila Canyon. Through a services agreement, MEC will provide certain operational, procurement and ad- ministrative services for CCR. The CCR investors expect to finance a portion of the partnership, and pay related fees and expenses, with the proceeds of debt fi- nancing. A portion of these proceeds will be used to recapitalize Bowie's existing capital structure. Jefferies is acting as sole financial advisor on the transaction. In connection with the transaction, Bowie will refinance its existing senior secured credit facilities with new debt financing. Specifically, Bowie Resource Holdings LLC and Canyon Finance Corp. intend to offer up to $375 million of se- nior secured notes due 2022 through a private placement. Bowie intends to use the proceeds to refinance its existing se- nior secured credit facilities and finance the acquisition of Bowie by CCR. In ad- dition, Javelin and CLISA will contribute cash to CCR in exchange for equity in CCR and certain exclusive export market- ing rights. Jefferies is acting as sole initial purchaser and book-runner for the notes. Gardner is Nominated to Lead OSM U.S. President Donald Trump nominated Steven Gardner to be the director of the Office of Surface Mining, Reclamation and Enforcement (OSM) at the U.S. Department of the Interior. U.S. Secretary of the Interior Ryan Zinke hailed Gardner's nomination. "When confirmed, Steve will be an unbelievable asset to coal country and the entire team at the Department of the Interior," said Secretary Zinke. "Steve is highly regarded in the mining industry for his extensive experience and insight." Gardner is currently serving as the president and CEO of ECSI LLC, a consult- ing practice where he focused on natural resources, mining, reclamation, energy, environmental, health and safety issues. As a licensed professional engineer, Gard- ner has worked on projects throughout the U.S. and internationally. Gardner was the 2015 president of the Society for Mining, Metallurgy and Exploration (SME) and is recognized as a distinguished member. SEC Files Complaint Against Rio Tinto Over RTCM The U.S. Securities and Exchange Com- mission (SEC) filed a complaint in rela- tion to Rio Tinto's disclosures and timing of the impairment of Rio Tinto Coal Mo- zambique (RTCM). The impairment was reflected in Rio Tinto's 2012 year-end ac- counts. Rio Tinto said it intends to defend itself against these allegations. In the civil complaint filed in the U.S. District Court for the Southern District of New York, the SEC alleged that Rio Tinto committed fraud by not accurately dis- closing the value of RTCM and not impair- ing it when Rio Tinto published its 2011 year-end accounts in February 2012 or its interim results in August 2012. Rio Tinto said it believes that the SEC case is unwarranted and that, when all the facts are considered by the court, the SEC's claims will be rejected. Separately, Rio Tinto has reached a settlement with the United Kingdom's Financial Conduct Authority (FCA) in re- lation to the timing of the impairment of RTCM. The FCA determined that Rio Tin- to should have carried out an impairment review in relation to RTCM for its 2012 interim results and, if it had done so, those results published in August 2012 would have reflected the impairment it recorded six months later. The FCA deter- mined that Rio Tinto breached the FCA's Disclosure and Transparency Rules and imposed a financial penalty on Rio Tin- to of £27,385,400 ($36.4 million). The size of the fine is calculated by reference to the company's market capitalization. The FCA made no findings of fraud, or of any systemic or widespread failure by Rio Tinto. The case is now closed. The Australian Securities and Investments Commission is also reviewing the RTCM impairment. RTCM was acquired in 2011 and di- vested in 2014. The now-closed Bowie portal in Colorado, the namesake for Bowie Resource Partners, will be folded into CCR.

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