Alpha Natural Resources' Unit Wins Wyoming Coal Tract
In another sign that leasing new coal tracts in the Powder River Basin is becoming unusually competitive, Alpha Natural Resources' winning bid on Wednesday for a Wyoming coal tract also sought by a subsidiary of Peabody Energy was the highest per mineable short ton the Bureau of Land Management ever received for a Wyoming PRB tract.
The Caballo West Coal Tract abuts Peabody's Caballo mine to the west, and Peabody through its BTU Western Resources subsidiary applied for the lease in order to add on to existing reserves. Of the 14 coal tract auctions completed by the BLM since 2000, only this auction and the last one in July, both between Alpha and Peabody, have been lost by the company that applied for the initial lease by application (or LBA).
An Alpha subsidiary, Alpha Wyoming Land Company, placed the winning bid of $143,417,403.80 for the 1,024-acre plot south of Gillette, Wyoming, beating BTU Western Resources' bid by 12%.
With an estimated 130.2 million st of mineable coal, Alpha's bid for Caballo West is worth about $1.10/st. BTU Western Resources bid $127,592,080 or 98 cents/st for the tract.
Prior to the latest auction, the highest paid for a Wyoming LBA was the 97 cents/st paid by Arch subsidiary Triton Coal for a tract near the North Rochelle mine in February 2005.
The BLM said the coal spec at Caballo West is 5,501 Btu/lb and has 0.33% sulfur content and the lease allows Alpha to recover all coal available through surface mining techniques.
"We make sure that the bid meets the fair market value. We have a confidential process where we determine a fair market value, and the panel decides whether the bids we received meet or exceed that," said Kathy Muller Ogle, a geologist for Wyoming's BLM.
The auction was a reversal from last month, when BTU Western Resources outbid another Alpha subsidiary, Alpha Coal West, which had applied for the lease of the Belle Ayr North Coal Tract. In that auction, BTU Western Resources paid 95 cents/st, at that time the second-highest price the BLM had ever received for a coal tract in the Wyoming PRB.
The Caballo West Coal Tract shares its southern border with Belle Ayr North.
Last month, Alpha spokesman Rick Nida said the company's Wyoming mines combined had more than a decade of supply left. Based on company projections that its current Wyoming reserves sit at about 650 million st, Caballo West would increase Alpha's reserves in the state by about 20%.
Alpha will pay an additional $3/acre annually and 12.5% of the value of coal produced. From the approximately 400 million st Wyoming produced in 2010, coal royalties amounted to $598 million. Wyoming shared the royalties nearly equally with the federal government.
(Platts Aug. 2011)