TORONTO, Cananda – Sherritt International Corp. is selling its entire coal business to two separate buyers for a total of $946 million, split almost evenly between Westmoreland Coal and Altius Minerals.
Sherritt has been one of Canada’s largest coal producers, but it’s a diversified resource company with operations in several countries, including Madagascar, where it has a major nickel operation, and Cuba, where it has an oil business.
“Today’s transaction to divest the coal business is the culmination of a competitive bidding process which has extended over several months,” Sherritt CEO and president David Pathe said Tuesday’s announcement.
“It simplifies our asset portfolio to concentrate on our core strengths, enhances our liquidity, and provides us with the opportunity to reduce our debt.”
Sherritt’s operating thermal coal mines in Alberta and Saskatchewan are going to Colorado-based Westmoreland Coal Co., which operates six coal mines in Montana, Wyoming, North Dakota and Texas.
“This is an historic event for Westmoreland. The acquisition of Sherritt’s coal operations represents a transformational opportunity to acquire seven producing coal mines, which are highly complementary to our existing operations and expertise,” said Keith E. Alessi, Westmoreland’s executive chairman.
Westmoreland, based in Englewood, Colo., near Denver, will pay a total of $465 million, including $312 million cash and the assumption of capital leases valued at $153 million.
It also expects to integrate the workforces of Sherritt’s Prairie and Mountain coal opertions with its own operations. The companies didn’t announce how many Sherritt employees are involved.
Sherritt and Westmoreland scheduled separate mid-morning conference calls with analysts.
A group led by Altius Minerals of St. John’s, N.L., will buy Sherritt’s entire coal royalty portfolio as well as Saskatchewan development projects for a total of $481 million cash.
Altius and other partners including a subsidiary of Liberty Mutual Insurance will acquire a 51 per cent interest in a portfolio of 11 producing coal and potash royalties in Alberta and Saskatchewan.
“We will now generate royalty revenue from a well-diversified portfolio of 12 major Canadian mining operations that can grow significantly through Altius’ existing pipeline of pre-production stage royalties,” said Altius chief executive Brian Dalton.
“The addition of an extensive undeveloped mineral lands position also fits perfectly with Altius’ proven project generation and royalty creation abilities.”
The Newfoundland-based company will also acquire Sherritt’s 50 per cent interest in a partnership that has billions of tonnes of undeveloped coal and potash resources in Saskatchewan.
Sherritt also issued a vague statement Tuesday saying it has received a demand for a special shareholders meeting to remove certain independent directors from the company’s board.
The company didn’t identify which shareholder had submitted the requisition and said it would “provide an update in due course.”
Sherritt currently has eight independent directors on a nine-member board, which includes Pathe. Its chair is Harold (Hap) Stephen, a well-known expert in corporate restructurings.