The deal, made for a purchase price of $640 million in cash as well as more than 6.5 million shares of Massey common stock valued at $320 million, significantly increased Massey’s metallurgical coal production and reserves.
Cumberland, based in Abingdon, was one of the largest privately held coal producers in the US with 2009 coal revenue of $550 million generated from the production and sale of 7.8 million tons of high-quality central Appalachian coal. Massey acquired the producer free of debt.
Assets received in the deal included about 416 million tons of contiguous coal reserves and preparation facilities in Kentucky and southwestern Virginia.
Of the estimated reserves, Massey said earlier this year that more than half had metallurgical coal qualities.
Cumberland’s operations produced both steam and met-quality coals. About 4.8Mt of its annual production was of metallurgical quality, with 800,000t of that being sold into the metallurgical coal market.
Including the newly acquired Cumberland reserves, Massey’s estimated total reserve base is now 2.9 billion tons and approximately 1.3Bt of that has metallurgical qualities.
"We are very pleased to conclude this acquisition and we look forward to integrating the Cumberland operations into our business,” Massey president Baxter Phillips Jr said.
“We welcome Cumberland's workforce of over 1000 talented and experienced miners and support staff and are proud to have them as part of the Massey organization."
While chairman Don Blankenship was unable to attend the closing, he did comment in an announcement of the transaction in January that the deal would be an excellent fit for Massey’s business strategy.
"The Cumberland assets and operations will be highly complementary to our existing base and fit well with our strategy in central Appalachia,” he said.
“Cumberland's track record of low-cost production, their focus on underground mining and their low legacy liabilities are consistent with Massey's history and strategy.
“Our analysis shows it will be accretive to earnings per share beginning this year and we believe it will add significant shareholder value."
Massey expects to be able to use coal produced from the acquired operations to increase met coal sales by up to 5Mtpa over the next couple of years.
