By Hector Forster
June 2, 2020 - European group Sev.en Energy has acquired US metallurgical coal miner Blackhawk Mining to expand the utility trader's exposure to met coal at a time of low prices for the commodity.
Blackhawk and Sev.en did not disclose terms of the private transaction in a joint statement June 1, with many of Blackhawk's prior shareholders originally funds with short-to-medium term investment horizons, trading debt securities and converting to equity.
The deal follows talk of further consolidation in the US coal industry, and allows the Lexington, Kentucky-based coal mining and trading group to find a single coal industry-based shareholder after Blackhawk's restructuring from Chapter 11 last year.
Sev.en is controlled by Czech billionaire investor Pavel Tykac, who earlier bought lignite coal mines and launched Czech Coal before establishing Sev.en and branching into power plants and trading.
"This is a significant step for Sev.en Energy as the group ventures fully into the metallurgical coal mining industry," said Alan Svoboda, executive director of Sev.en Energy, who is leading the group's international expansion. "Blackhawk is a great company with highly productive Tier-1 assets and large coal reserves. We look forward to working with Blackhawk, its management and employees to secure the long-term success of the company and establish a platform for further growth in the region."
Lower demand for coking coal due to the coronavirus pandemic in key markets such as Europe, the US and India pushed US spot coking coal prices toward $100/mt FOB, which is well below marginal US mining costs.
With several US mines idled, a long-term view may help the industry weather low cashflow and prepare for stronger demand as India and China leads demand growth, which may tighten the coking coal market after limited investments.
In 2019, privately held Blackhawk Mining had $1 billion in revenues and $120 million EBITDA, the statement said.
Blackhawk Mining has annual production capacity of 7 million-8 million mt of metallurgical coal among five underground and open pit mining complexes in West Virginia and Kentucky, supplying met coal locally and internationally, and operates thermal coal mines, the statement said.
With the transaction, "Blackhawk is well positioned to navigate the current market environment and pursue synergistic growth opportunities in the sector," said Blackhawk CEO Jesse Parrish in the statement. Blackhawk plans to integrate into the Sev.en Energy portfolio, he said.
Sev.en Energy is a Liechtenstein-based group with branch offices in Prague and London operating in power generation, commodity trading and coal mining in Europe and Australia, according to its website.
Sev.en took a 17.1% stake in TSX-listed coking coal miner Corsa Coal Corp. last month in a deal worth around $2.5 million, marking its initial foray into met coal.
Sev.en bought the Corsa stake held by Sprott Resource Holdings, stating it has a long-term view of the investment and may acquire additional securities of the issuer. Corsa operates low-vol hard coking coal mines in Pennsylvania and Maryland, and sold 1.8 million mt in 2019 in both domestic and export markets.