UNITED STATES and SOUTH AFRICA – Alpha Natural Resources, a large US coal producer with head offices in Virginia, has filed for Chapter 11 bankruptcy. The bad news is not confined to this continent, either. Glencore subsidiaries Optimum Coal Holdings and Optimum Coal Mine in South Africa is seeking supervision to begin business rescue proceedings.
Alpha is the world’s third largest supplier of metallurgical coal used in steelmaking. As Chinese demand for steel slides and the coal price follows it, Alpha’s stock price has shrunk to US$0.03 per share. This is a steep decline for a company whose shares were trading at US$50 and more when it bought Massey Energy for US$7.1 billion in 2011. Alpha reported total liabilities of US$7.11 billion.
Walter Energy of Alabama filed for bankruptcy protection earlier this year. It had three producing mines in British Columbia.
Glencore announced the demise of Optimum earlier this week. Optimum contracted with the South Africa power utility Eskom in 1993 to supply 5.5 million tonnes of coal annually to Eskom power plants. Needless to say the price of the contract is woefully low, and Glencore said it has been unable to renegotiate the deal.
Eskom plans to enforce non-supply penalties in the contract, and that pushed Optimum over the brink, said Glencore.
The situation elsewhere in the world leaves Canadian coal king Teck Resources looking good. Teck turned a tidy gross profit of C$676 million in the second quarter. The falling dollar, lower oil prices and its cost reduction program that trimmed US$17 per tonne off coal production costs all played a role. The company is looking ahead to Q3 when it expects to sell at least 6.0 million tonnes of met coal at US$93 per tonne for the highest quality.
Learn more about Teck’s coal operations by clicking here.