Severstal to Sell Pennsylvania Coal Unit for $60 MillionTim Loh
OAO Severstal, Russia’s second-largest steelmaker, agreed to sell U.S. coal producer PBS Coals to a Canadian mining company for $140 million six years after it paid about $1 billion for the unit.
Corsa Coal Corp., based in Toronto, will pay $60 million in cash, assume $60 million of reclamation and water-treatment liabilities and give the Russian owner the balance of $20 million in collateral for other liabilities, Severstal said in a statement today. Severstal, controlled by billionaire Alexey Mordashov, bought PBS in 2008 to provide a guaranteed supply of coal for its U.S. operations.
PBS, based about 60 miles (100 kilometers) from Pittsburgh, has 13 developed and three active mines that sold 1.7 million tons of metallurgical coal last year. The sale of the unit follows a steep drop in steelmaking coal prices. Seaborne quarterly contract prices for the coal have declined by more than half to $120 a metric ton from $330 in 2011, according to Bloomberg Industries.
Corsa, which has a market value of C$90 million ($84 million) is raising funds for the purchase by selling 19.9 percent of its outstanding shares to Sprott Resource Corp., a Toronto-based investment company. Corsa also announced it will appoint George Dethlefsen, an executive with Quintana Capital Group LP, its largest shareholder, as the new chief executive officer.
The sale of PBS Coals is expected to be completed by mid-August, Severstal said.
On May 14, Severstal said it’s considering “a range of strategic options” for its U.S. operations. The company was weighing several bids, including one from U.S. Steel Corp. for two plants, people familiar with the matter said in May.
Severstal was advised by Deutsche Bank AG and Skadden, Arps, Slate, Meagher & Flom LLP. Corsa obtained legal and tax advice from Stikeman Elliott LLP, Vinson & Elkins LLP, PennStuart, Fike, Cascio & Boose LLP, Jackson Kelly PLLC, and PricewaterhouseCoopers LLP.