Nearly 600 locked-out Eagle Butte and Belle Ayr coal miners waiting for a call to return to work may not get that call.
While Contura Energy Inc. continues to negotiate with the federal government to close its deal to buy the mines from bankrupt Blackjewel LLC, the deal may not be completed before Blackjewel runs out of money and has to liquidate the mines.
That was one of the takeaways from Contura’s 2019 second quarter earnings call Wednesday morning.
If that happens, Contura, which sold the mines to Blackjewel in 2017 and is still on the hook to reclaim them, would move into full reclamation mode, said Andy Eidson, the company’s chief financial officer.
Recognizing that the sale “is wholly dependent on reaching an agreement” over federal leases, Blackjewel is “on a pretty tight clock on day-to-day operating funds,” Eidson said. “It’s not an absolute certainty an agreement will be reached before (Blackjewel has to convert its Chapter 11 bankruptcy to) Chapter 7.”
Eidson said if that’s the case, Contura has crunched the numbers and believes it can do the required reclamation at the Eagle Butte and Belle Ayr mines for about $100 million over a period of eight to 10 years. While the company has bonded for about $250 million to do that work, the bond amount is a high-end projection of reclaiming the land that includes things like buying expensive equipment Contura already has.
He also said that since Blackjewel filed for bankruptcy on July 1, Contura’s connection to the company has caused its stock to decline by about 40%.
The preferred outcome continues to be reaching an agreement with the federal government and reopening the mines, Eidson said. However, Contura also is prepared for the alternative.
Going straight to reclamation is “certainly something we would rather not deal with, but if this is the way we have to deal with it, we believe the net impact to the company would be very manageable going forward.”
Neither Eidson or Contura’s new Chairman and CEO David Stetson directly addressed recent reports that the company’s plan for Eagle Butte and Belle Ayr is to mine the exposed coal, then go to reclamation, which would take an estimated six to 12 months. Eidson did, however, say that Contura isn’t interested in operating mines in the Powder River Basin for an extended period.
“I don’t know that we’re particularly interested in doing anything longer-term,” he said, adding the plan would be “attacking a more short-term operational approach.”
While Blackjewel’s sale to Contura continues to drag out, hundreds of Wyoming coal miners and their families are in their seventh week out of work and have been through so many ups and downs during a messy bankruptcy that they’re losing faith about returning to work full-time, said Deanna Fritz.
Fritz worked at the Eagle Butte mine while her husband works for a tire contractor that did business with Blackjewel. While the shutdown of the mines didn’t cost him his job, he has had his hours cut back, which means they’re trying to provide for their seven kids at home on one reduced paycheck.
“It’s just frustrating,” Fritz said about waiting for a call to return to work.
Even if Contura’s deal goes through and the mines reopen, Fritz said she’s not interested in returning for just a few months. The way she figures it, she’s already looking for other jobs and doesn’t want to do it again in a few months.
“If you’re not looking for another job at this point, you’re setting yourself up,” she said. “It’s not sure the mine is going to come back. Now with that expectation they may not be in it for the long-haul, this is just another downfall. You really don’t know what to believe or expect.”
A 12-year coal mining veteran, Fritz was caught up in a round of layoffs a few years ago at the Buckskin mine. That’s when she moved on to Eagle Butte. Now that she’s been put out of work again, she’s angry with Blackjewel for not only allegedly mismanaging the company into bankruptcy, but because senior officials went out of their way to reassure the coal workers their jobs were safe.
“They came out here and kept telling us everything was fine, everything was OK,” she said. “But there was so much mismanagement that nobody really knew what was going on.”
If she is called back, Fritz said she’s not interested unless Contura plans to operate in the Powder River Basin for the six to 12 years that was presented during Blackjewel’s sale hearing in U.S. Bankruptcy Court.
“I’m not looking for something part-time and to hop to another job and hop to another job,” she said. “That’s not my mentality of a work ethic, and if that’s the type of employee they’re looking for — disposable workers — that’s not who I am.
“I’m not a disposable commodity and am not going to allow someone to treat me like that.”
A plan for Pax
While it’s still a question whether the Wyoming mines will reopen and if so for how long, Contura definitely wants to reopen and operate the Pax Surface Mine, Stetson said.
Saying it was “the right decision to go after these assets,” the CEO added that Pax could produce a half million tons of coal that would generate enough money to cover the total cost of the Blackjewel deal, which comes to almost $34 million.
The company also reports a net income of $24.3 million for the second quarter of this year, more than $50 million less than the $74.6 million in the same period of 2018. For the first six months of 2019, Contura has a net income of about $32 million on revenues of nearly $1.3 billion.