Independent metallurgical coke producer SunCoke Energy Inc. (SXC) is working on its strategy of downsizing its coal mining business. The company said that its wholly owned subsidiary, Jewell Resources, Inc., has entered into a definitive agreement to sell 100% of its interest in the Harold Keene coal companies (“HKCC”) to Omega Holdings, LLC (“Omega”) for nearly $9.5 million.
However, the deal is subject to Omega’s ability to obtain third-party financing and the assumption of $2.5 million of estimated reclamation obligations. Based in Cedar Bluff, VA, Omega has various coal mining operations.
In 2013, SunCoke Energy idled a large portion of HKCC’s operations due to weak mining conditions. HKCC has nearly 20 million tons of proven and probable coal reserves located on approximately 250 acres in Russell and Buchanan counties, VA. The agreement for sale will also include HKCC’s warehouse, two idled coal preparation plants and certain coal loadout facilities.
The decision to sell HKCC does not come as a surprise, as SunCoke had already made its intention clear and declared its strategy of paring or completely divesting its coal assets (read: SunCoke Energy Plans to Cut Coal Mining in Weak Market).
The World Steel Association has scaled back its 2014 global steel usage forecast to a 2% increase from 3.1% previously and expects demand for steel to increase by 2% in 2015. The estimated rise in demand is much lower than the 3.8% registered in 2013. This implies a lower-than-expected demand for coke.
SunCoke Energy currently has a Zacks Rank #1 (Strong Buy). Other well-ranked stocks in the space include Hallador Energy Co. (HNRG), Natural Resource Partners LP (NRP) and Foresight Energy LP (FELP). All these stocks carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment