Tuesday, December 6, 2011

Alpha Natural Resources Settles with DOJ

Earlier today, Alpha Natural Resources (ANR) announced that it had reached an agreement with the government to resolve the civil proceedings resulting from the Upper Big Branch (UBB) mine explosion that killed 29 people.

This event happened at Massey Energy back in April 2010 and subsequently ANR bought out Massey. 

The settlement for $209M hopefully allows ANR to move forward with less government scrutiny. One of the biggest issues with the coal miners in the Appalachian is higher costs from stricter regulations. 

The stock initially jumped higher at the opening, but has settled back to a 3-4% loss. Having this issue resolved should be good for the stock going forward. 

The $209M settlement includes money for the families of the killed and injured employees plus increased expenses on safety. The expenses are as follows:
  • to invest $80 million over the next two years in added safety measures at legacy Massey mines and Alpha mines, including ongoing safety skills and compliance training, construction of a state-of–the-art safety training facility, and the development and installation of next-generation mine safety equipment;
  • to establish a $48 million trust to fund research and development projects designed to improve mine health and safety;
  • to pay $46.5 million to families of the fallen miners and two individuals affected by the UBB explosion, of which $16.5 million has already been paid as part of or will be paid as part of settlements and anticipated settlements, in accordance with the Non-Prosecution Agreement;
  • to pay $34.8 million in connection with the resolution of outstanding citations, violations, and orders related to MSHA's investigation arising from the UBB explosion and other non-UBB related matters involving legacy Massey entities prior to Alpha's acquisition of Massey on June 1 , 2011.  

ANR remains one of the cheapest stocks in our portfolios. Hard to tell whether this pending issue was holding the stock down or whether just fears of a global slowdown is the reason for the weak results in 2011. 

ANR with the met coal from the Massey buyout is currently one of the most appealing coal miners in the world. It won't be long before this stock regains traction.


Models with ANR - allocations based on 11/25:

Stone Fox Capital holds an allocation of 13.3% in $ANR in his Opportunistic Arbitrage Covestor Model

Stone Fox Capital holds an allocation of 5.0% in $ANR in his Opportunistic Arbitrage Long Only Covestor Model



Disclosure: Long ANR. Please review the disclaimer page for more details.


1 comment:

drum handling equipment said...

As in any industry, mining should make safety of their people a priority.