Sherritt sells coal assets, including Sask. mines, for $946M

Date of Article: December 26, 2013

Source: Leader Post

Author: Bruce Johnstone

Link: www.leaderpost.com/business/Sherritt+sells+coal+assets+including+Sask+mines+946M/9323829/story.html

REGINA — Sherritt International Corp. is selling its entire coal business, including three operating coal mines in Saskatchewan, to two separate buyers - Westmoreland Coal of Denver and Altius Minerals of St. John's, N.L., for a total of $946 million, the companies jointly announced Tuesday.

Toronto-based company Sherritt, which calls itself "Canada's largest thermal coal producer," is 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, we've announced the sale of all of our coal assets in Canada, including our operating businesses, which we've sold to Westmoreland Coal, and our potash and coal royalty streams, which we've sold to Altius Minerals, a royalty-based company out of Newfoundland," Sherritt CEO and president David Pathe said in an interview with the Leader-Post Tuesday.

Sherritt's operating thermal coal mines in Alberta and Saskatchewan are going to Colorado-based Westmoreland, which has six coal mines in Montana, Wyoming, North Dakota and Texas. Sherritt's Prairie Operations operates six coal mines in Alberta and Saskatchewan, which supply electricity generation companies with coal under secure long-term contracts. Production in 2012 from Sherritt's mine operations was approximately 31.2 million tonnes.

Westmoreland, the oldest coal company in the U.S., has assets in the U.S. that are very similar to Sherritt's Canadian assets, Pathe said. "They're excited about the opportunity and they're looking to grow in coal. I think they'll be good stewards of the business going forward."

Sherritt operates mines at Estevan, Bienfait and Coronach, which provide coal for SaskPower's Boundary Dam, Shand and Poplar River thermal generating stations, and an activated carbon plant in Bienfait. Sherritt employs about 600 people in Saskatchewan.

"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 Alessi, Westmoreland's executive chairman. Westmoreland, based in Englewood, Colo., near Denver, will pay Sherritt 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 coal operations with its own operations.

Sherritt also holds a portfolio of mineral rights located in Alberta and Saskatchewan, called Prairie Mines & Royalty Ltd. (PMRL), from which it earns royalties from the mining of coal and potash.

"It's a portfolio of coal and potash rights that are mined primarily by (Sherritt) and Westmoreland going forward on the coal side," Pathe said. "On the potash side, they're mined by companies like Potash Corp. of Saskatchewan and Mosaic."

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 welldiversified portfolio of 12 major Canadian mining operations that can grow significantly through Altius' existing pipeline of preproduction 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.

Pathe said he expects the transaction to close in the first quarter of 2014, but few, if any, operational changes as a result of the deal.

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