Published in the December 2009 Coal USA Magazine
While the merger was announced to the public in May 2009, on-and-off talks actually commenced in 2007, when the two had “exploratory discussions and due diligence” about an acquisition. The two revisited the potential in February 2009 before sealing the deal, which closed July 31, after majority stockholder votes by both producers.
Kost said work on integration had begun immediately after the May announcement, and a process was employed to make the transition as smooth as possible for all involved.
“The goal was to create an organization built on employee participation that would allow us to operate efficiently as a merged company, as well as a process that would serve as a model in the future as the company grows,” he said.
After determining the executive team to lead the combined company, Kost said an organizational framework was developed for those areas that would remain unchanged.
“There was not a wholesale rework of both companies,” he said.
“Many things were working great and saw little if any change – particularly at the division level. Most of the change that was required was due to the significant increase in overall size, coupled with the regulatory and financial requirements of the new company.”
Along the way, the new producing giant – which now has 6200 workers, 60 mining operations and 14 preparation plants across the US – did come up against a challenge, but one Kost said it was ready for: changes to its enterprise resource planning solution.
In a process still ongoing, he noted that the new ERP system conversion was a significant undertaking, but that the software would be configured by the company to best suit business needs.
The new producer can proudly say that safety performance has not missed a beat in the transition, which stems from the fact that both companies share a strong commitment to the workforce and employee safety. That commitment to delivering a leading safety performance is only strengthened as a combined entity.
“Before the merger both Foundation and Alpha were on track to deliver record safety results in 2009, and that trend continues today,” Kost noted.
He added that the Eagle Butte mine recently celebrated two years without a lost time accident over more than a million hours worked, and the Belle Ayr complex recently marked a year without a lost time accident in 800,000 hours worked.
“It is noteworthy that, unlike some mergers, this business combination does not rely heavily on headcount reductions,” Kost said. “We have carefully reviewed human resources requirements and selected the best of both organizations to fulfill staffing requirements.
“While we have reorganized the business units to fit the geography of the newly expanded business, the operations at the mines are largely unaffected by the merger.
“All mines have been performing well though we have pared back production by reducing overtime, operating fewer shifts, shortening work weeks and cutting back on contractor production to match production with demand.”
Surface mining is ANR’s main business, with 65% of its mines producing from pit operations (53% west and 12% east). Continuous mining operations now make up 20% and longwall 15%.
Fifty-three per cent of volumes originate in the Powder River Basin, while central Appalachia and northern Appalachia make up 29% and 18% respectively of the total output mix.
The combined producer’s reserve spread of 2.3 billion tons is solid across US coalfields. About 35%, or 800 million tons, can be found in the northern Appalachian region; PRB holdings total 760Mt, or 32% of the total; central Appalachia contains 32% of the reserves, or 762Mt; and 1%, or 26Mt, can be found in the Illinois Basin.
Kost said the new company’s continued growth was not about “pursuing growth for growth’s sake”, and that there were both challenges and opportunities ahead.
One obstacle has been ongoing permitting issues with federal entities which are keeping every company’s new mine plans grounded much longer – though he noted that it was not so much the lengthy wait as it was a continual change in the “rules of the game”. “We like certainty [but] we can be flexible and adapt,” Kost noted, but pointed out that adjustment could be difficult for anyone when the target was constantly moving.
Another issue that would impact the company in the short term was the market, particularly the complex steam coal sector. ANR is aware that utility inventories are high, so it is evaluating its production portfolio to bring a balance to production versus demand, levels which constantly change.
As the combined company looks forward to a recovery in the economic environment, which Kost anticipates will be sometime in late 2010 or 2011, ANR is proud to retain its talented workforce, a group both former companies worked hard to build from the tight labor pool that plagued many operators in 2008.
Because coal is and will remain prevalent, Kost said ANR was looking at its people as its most exciting opportunity. By leveraging workers’ skills and both companies’ long histories of safe operations, the combined “Running Right” grassroots safety and best practices program can be successful, and has already secured the enthusiasm of managers and workers alike.
The merger
Announced: May 2009 Finalized: July 2009
Producer ranking: 3rd in the US, behind Peabody and Arch
Combined staff: 6200
Combined operations: 60
Combined prep plants: 14
Reserve base: 3.2Bt
