This U.S. Coal Miner’s Getting Paid to Buy Assets in Appalachia

  • Consol Energy to pay Booth $44 million to divest two mines
  • Booth Energy to pick up Miller Creek, Fola thermal coal mines

James Booth has done it again.

In September, his Booth Energy coal group bought a collection of Appalachian mines from a Florida utility company for nothing beyond liabilities. On Monday, it acquired another two sites in West Virginia -- this time, from Consol Energy Inc. -- for nothing beyond liabilities. In fact, Consol will pay a Booth Energy unit $27 million at closing and $17 million more over four years, according to a Securities and Exchange Commission filing on Monday.

Such is the state of U.S. coal markets that Consol, looking to expedite its transition from mining coal to exclusively producing natural gas, is willing to part with non-core assets for, well, nothing. For Booth and others, coal’s bust is yielding bargains. Last winter, West Virginia’s Jim Justice paid $5 million -- and assumed liabilities -- to buy back mines he’d previously sold for $568 million.

To be sure, Booth will be saddled with $103 million in liabilities from his deal with Consol. Some of Consol’s cash will help Booth obtain surety bonds related to future cleanup costs, Consol Chief Financial Officer David Khani said in a phone interview. The deal also gives Booth access to mines that are near some of his other operations that he can leverage, said Ted O’Brien, chief executive officer at Doyle Trading Consultants LLC.

Booth wasn’t immediately available for comment late Monday.

Two Mines

Consol’s Miller Creek assets consist of two surface mines, two underground mines and a preparation plant. The facility produced 2.1 million tons of coal in 2015, Consol spokesman Brian Aiello said in an e-mail. The Fola site is idled and last produced 1.3 million tons in 2012. Taken together, the facilities will lose money this year, Khani said.

“From a Consol perspective, this will actually help our leverage ratios and operating cash flows and such,” Khani said.

The deal marks Consol’s exit from Central Appalachia, the country’s most storied coal-mining region and the one that’s suffered the most in the industry’s recent years of downturn. Consol is retaining its stake in three Pennsylvania coal-mining sites that are operated by CNX Coal Resources LP, the master-limited partnership it created last year.

“This certainly isn’t the first time we’ve seen a company make an upfront cash payment in order to get” mines in central Appalachia off their books, Jeremy Sussman, an analyst at Clarksons Platou Securities Inc., said in an e-mail. In Consol’s case, “no one was giving the mines any real value, and this isn’t a material amount of cash, so frankly, we view the opportunity to streamline the company as a sensible move.”

Consol shares were unchanged at 4:21 p.m. New York time after rising to as high as $17.33 in after-market trading.

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