KJIPUKTUK (HALIFAX) – Things haven’t been going all that well lately for Foresight Energy, the new owner of the Donkin mine.
The holding company, owned by coal magnate Chris Cline, is trying to stave off a $600 million lawsuit by shareholders. It’s also absorbing the indefinite shutdown of one of its top producing US mines because of an underground fire that the company has been unable to extinguish.
And then there are the troubles all US coal producers face these days – oversupply, falling prices, and increasing environmental constraints.
In December of last year a judge in Delaware ordered Foresight Energy to buy back $600 million in bonds from shareholders after another company, Ohio-based Murray, acquired a major interest. Ever since the company has announced deadline after deadline to resolve the issue, only to miss them all.
$600 million is a lot of cash. It also raises the question why bondholders are so eager to sell.
Ongoing troubles with Cline’s Deer Run mine in Illinois no doubt are a big part of the reason.
An underground fire that has been burning since March of 2015 forced the mine to stop production, and it has been mostly idle ever since. Elevated carbon monoxide levels resulting from the fire have so far prevented the company from retrieving its equipment and seal the mine.
Roughly 100 miners have been laid off, triggering a class action suit because the company allegedly did not give the 60 days’ termination notice required by law. Cline-owned mines are not unionized.
An application by the company to expand mining in the area has run into fierce opposition from local residents, who have complained about cracks in their basement foundations, damage to roads and wind-blown coal dust.
In 2015 just 1.9 million tons of coal was produced at the site, after producing 5.5 million tons in 2014.
It’s not as if being in the coal mining business is particularly profitable these days even under the best of circumstances.
Federal clean air legislation and competition from natural gas has seen demand for coal by power-generating facilities, traditionally its largest users, decrease dramatically, writes the Washington Post.
All this bad news explains why Foresight Energy saw its shares tumble by 80 percent in 2015. The slide isn’t slowing down. Just last month its shares plummeted by a whopping 45 percent.
The reopening of the Donkin mine in Cape Breton is eagerly anticipated by many Cape Bretoners who desperately need a job and are hoping for larger economic benefits as well.
The difficulties facing the US owner suggest that provincial and municipal governments should exercise caution in their talks with the company. Also, they are negotiating more from a position of strength than perhaps is being realized.
Maybe Cline needs Cape Breton more than Cape Breton needs Cline.
See also: Safety record of Donkin mine operator causes concern
