Walter Energy

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Walter Energy, Inc. based in Birmingham, Alabama, is a producer and exporter of metallurgical, or coking, coal for the global steel industry. The company also produces steam and industrial coal, metallurgical coke, and coal bed methane gas.[1]

In December 2010, Walter Energy agreed to buy Canada’s Western Coal Corporation for C$3.3 billion (US$3.3 billion). The combined entity will have total coal reserves of about 385 million tons and be the world’s largest publicly traded “pure-play” metallurgical coal producer. The company expects to produce more than 20 million tons a year by 2021.[2]

Divisions

The company's metallurgical coal business, Jim Walter Resources (JWR), is the southernmost Appalachian coal producer. The company was formed in 1977 from the former Coke, Iron and Chemicals Division of U.S. Pipe & Foundry Company.[3]

JWR mines coal from Alabama's Blue Creek seam. JWR has grown from a small producer of less than 1 million tons of coal per year, produced solely for use in its sister company's coke ovens, into one of the 25 largest coal producers in the United States, with 6.3 million tons of coal sold in 2008 and plans to expand production to more than 9 million tons in 2010. Its mines are two of the deepest vertical shaft coal mines in North America. The mines also produce a significant quantity of coal bed methane gas, extracted and sold to market in a joint venture operation with Sonat Coal Gas Inc., a unit of the former energy conglomerate Sonat Inc.[4]

Walter Energy is also the parent company of Walter Minerals, an Alabama-based surface coal producer with a capacity of nearly 1.5 million tons, which produces coal for the Alabama steam and industrial coal markets.[5]

Walter Coke, the company's fuel coke producer, manufactures coke for use in blast furnaces and foundries. The company is headquartered in Birmingham, Alabama and was formerly known as Sloss Industries.[6]

History

The company was formerly known as Walter Industries, Inc. and changed its name to Walter Energy in April 2009. The predecessor company was founded by Tampa entrepreneur the late James W. Walter, Sr. in 1946. It spun off Mueller Water Products in 2006, closed Jim Walter Homes in 2009, also spinning off Walter Investment Management Corporation in 2009.[3]

In December 2010, Walter Energy said it will buy Vancouver's Western Coal for $3.3 billion -- a deal that will create one of the world's largest producers of steel-making coal. Western Coal's president and CEO, Keith Calder, said world steel production is expected to grow by 50 per cent over the next decade, and the combined company expects to boost production by more than 45 per cent over the next few years.[7] Prices for coking, or steelmaking, coal sold to Asia is projected to rise 8 percent in 2011, as estimated by UBS AG.[2] (In August 2011, Bloomberg reported that Walter Energy had declined 12 percent since the deal was announced, and its quarterly per-share earnings fell short of analysts’ estimates by 41 percent. The announcement caused Walter Energy to plummet by the most since at least 1995.[8])

Three weeks after buying Western Coal, Walter Energy bought a shipping terminal in Alabama to "have unconstrained shipping capacity," according to interim Chief Executive Joe Leonard. The company has three coal projects in Alabama, and bought the assets of Mobile River Terminal Co from a unit of U.S. Steel for an undisclosed price. The facility is located less than four miles from the McDuffie Terminal where Walter Energy ships all of its coal to customers in South America and Europe. As of 2010, Mobile River Terminal handles 3.2 million tons of iron ore, 1 million tons of furnace coke, and 0.5 million tons of other products annually, according to its website.[9]

On March 11, 2011, Walter Energy said it had agreed to buy the North River mine in Fayette County from Chevron. Walter also said it had leased about 75 million tons of Blue Creek coking coal reserves in Tuscaloosa County from a subsidiary of Chevron. Royalty rates are in line with existing agreements, Walter said.[10]

Coal mines and projects

Western Coal's operating mines and potential projects are:

  • Perry Creek mine is located approximately 30 kilometres from the town of Tumbler Ridge, in northeast British Columbia. The mine produces approximately 2 million tonnes a year of metallurgical coal;[11]
  • Brule mine is located 45 kilometres south of a railroad mainline near the town of Chetwynd, in northeast British Columbia. The mine produces approximately 1.5 million tonnes of ultra-low volatile pulverized coal injection (ULV-PCI) coal for steelmaking;[12]
  • Belcourt and Saxon project are owned by Belcourt-Saxon Coal Limited Partnership, a joint venture of Western Coal and Peace River Coal. The undeveloped coal deposits are located 65 to 125 kilometres south of Tumbler Ridge in northeast British Columbia.
  • Maple Coal's operates are located 32 kilometres east of Charleston, West Virginia. The operations include the Eagle underground mine, which produces a premium high volatile metallurgical coal for US domestic and export steel making markets, and the Sycamore open cut mine which produces thermal coal for power generation in the US eastern seaboard. The Eagle mine produced approximately 400,000 tonnes in 2010 with the company planning to increase that to 1.0 million tonnes in 2012.[13]
  • Gaugley Eagle property, which is 145 kilometres from Charleston, West Virginia. The proerty consists of the Black Pearl underground mine and the Lower Muddlety open cut mine.[14]

Closed coal mines

  • Willow Creek mine is located 45 kilometres west of the town of Chetwynd, in northeast British Columbia. The mine is an open cut operation which produces approximately 500,000 tonnes a year of hard coking coal and low-volatile PCI coal for steelmaking. The company had applied to expand the mine to produce 1.7 million tonnes a year.[15] However, in March 2013 Walter Energy announced that "the Company currently expects to idle its Willow Creek operation within the next several weeks and anticipates recording a one-time cash charge of approximately $7.5 million in connection therewith. The Company currently expects that full year 2013 metallurgical coal production will be in line with production levels in 2012."[16]

Alabama Coal port expansion

The Alabama State Port Authority has announced $360M to be spent over five years to improve infrastructure at the Port of Mobile,[17] and hopes that two customers - Drummond Company and Walter Energy - will pay for a proposed $9.5 million project to add export capacity at the Alabama McDuffie Coal Terminal. On Feb. 22, 2011, authority members voted to give state docks Director Jimmy Lyons the power to contract for a second shiploader at the terminal if he can reach an agreement with the Drummond Company and Walter Energy to pay for it by accepting a surcharge on top of the fees they normally pay to export coal through the terminal. The amount of metallurgical coal shipped from the Port of Mobile is rising due to increased demand from overseas steelmakers and widespread flooding in Australia in 2010, which shut down several coal mines there.[18]

Demand for export coal is increasing so much that Birmingham-based Walter had recently purchased the Mobile River Terminal for $35 million to increase its shipping capacity. Company officials said that they still planned to use McDuffie as well. McDuffie has two shiploaders, but one of them is broken. Lyons said McDuffie currently has capacity to export between 10 million tons and 12 million tons of coal a year. A new shiploader, to be built by Shanghai-based ZPMC, would expand capacity by about 50 percent. If Drummond and Walter do not agree to a surcharge to fund the improvements, the facility will reportedly continue to operate with one shiploader.[18]

Coal waste spill

In late August 2011, Alabama coal mine regulators said about 3,000 of the 15,000 feet of stream affected by a July 15, 2011 spill of coal slurry by mine operator Jim Walter Resources had been cleaned up, but overall cleanup will be a long process. Officials said a plume of discolored sediment-laden water traveled from the spill site downstream to North River, and elevated levels of arsenic, lead and zinc were detected in water samples taken immediately after the spill. North River feeds Lake Tuscaloosa, a drinking water source. Officials said the levels had returned to normal.[19]

Personnel

On June 30, 2011, CEO Keith Calder resigned after assuming the position in April, telling the board of directors that he was leaving due to differing opinions concerning “management philosophy.” Calder was the CEO of Western Coal Corp., which Walter Energy acquired in April 2011.[20]

In September 2011, Walter Energy Inc. promoted Walter J. Scheller III to CEO. Scheller, 50, was president of the company’s U.S. operations and joined the company in June 2010 from Peabody Energy, where he worked for four years. He has also worked as an executive at CNX Gas and Consol Energy Inc.[20]

Contact Information

Walter Energy, Inc.
4211 W. Boy Scout Blvd.
Tampa, Florida 33607
Phone: (813) 871-4811
Website: http://www.jimwalterresources.com/

Articles and Resources

Sources

  1. ↑ "About Us" Walter Energy, Inc., November 2009
  2. ↑ 2.0 2.1 Jesse Riseborough, "Walter Energy to Buy Western Coal for $3.3 Billion as Price of Fuel Rises" Bloomberg, Dec. 3, 2010.
  3. ↑ 3.0 3.1 "Company History" Walter Energy, Inc., November 2009
  4. ↑ "Operations: Jim Walter Resources" Walter Energy, Inc., November 2009
  5. ↑ "Operations: Walter Minerals" Walter Energy, Inc., November 2009
  6. ↑ "Operations: Walter Coke" Walter Energy, Inc., November 2009
  7. ↑ "$3.3-B deal to create steel-making-coal giant" Winnipeg Free Press, December 4, 2010.
  8. ↑ Danielle Kucera and Tara Lachapelle, "Peabody Shows Coal Takeovers Burn Investors With Record Declines" Bloomberg, Aug. 30, 2011.
  9. ↑ "UPDATE 1-Walter Energy buys coal shipping terminal" Reuters, Dec. 21, 2010.
  10. ↑ "Walter Energy buying Fayette County coal mine from Chevron Corp." March 11, 2011.
  11. ↑ Walter Energy, "Perry Creek", Walter Energy website, accessed May 2011.
  12. ↑ Walter Energy, "Brule", Walter Energy website, accessed May 2011.
  13. ↑ Walter Energy, "Maple Coal", Walter Energy website, accessed May 2011.
  14. ↑ Walter Energy, "Gaugley Eagle", Walter Energy website, accessed May 2011.
  15. ↑ Walter Energy, "Willow Creek", Walter Energy website, accessed May 2011.
  16. ↑ Walter Energy, "Report of unscheduled material events or corporate event", March 22, 2013, page 2.
  17. ↑ Dave Helms (2010-10-27). Alabama State Port Authority approves $360 million to upgrade infrastructure. Press Register. Retrieved on 2010-10-27.
  18. ↑ 18.0 18.1 Dan Murtaugh, "Port Authority wants to pass along costs of coal terminal upgrade" al.com, February 23, 2011.
  19. ↑ "Ala. coal mine slurry spill cleanup continuing" Chron.com, August 26, 2011.
  20. ↑ 20.0 20.1 Simon Casey, "Walter Energy Names Ex-Peabody Executive Walter Scheller CEO" Bloomberg, Sep 12, 2011.

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