Published: July 22, 2008 09:03 pm            

Steelmaker acquires coal mining group

WELCH — The world’s largest steelmaker has bought out a southern West Virginia coal mining group, making it the second such acquisition to impact local mines in a week’s time.

Luxembourg-based ArcelorMittal announced Monday its agreement to purchase Concept Group, which has several mines in the Gary and Caretta communities in McDowell County.

This infusion of new capital is good news for southern West Virginia, Coal Association President Bill Raney said.

“We think it’s very, very positive in the sense of the infusion of capital and the abilities of those people who, through their skills, energy and very hard work, have put together successful companies,” Raney said.

Among the local mines owned by Concept are XMV, Inc., mines No. 36 and No. 37 at Elbert, XMV, Inc., Mine No. 35 near Gary, and XMV, Inc., Mine No. 32 at Caretta.

The purchase of the mining group by the largest steelmaker in the world “is a real testament to the managers, owners and miners of these companies,” Raney said.

Just last week, a merger was announced between Midwest iron ore pellet-maker Cleveland-Cliffs and the Southwest Virginia coal-mining company Alpha Natural Resources.

Steelmakers use high-grade coal to make their products, and metallurgical coal found in the coalfields of the two Virginias sets a global standard, Raney said last week after the Cleveland-Cliffs-Alpha merger.

The practice of steelmakers owning their own mines was common in the two Virginias during the 1930s and ’40s when companies such as U.S. Steel and Bethlehem Steel owned mines across the region. “Slowly, they got out of the coal business,” Raney said. “Now, we’re seeing the steel industry coming back in the coal business.”

The current pricing environment for coal is “probably as strong ... as we’ve every seen in our industry,” Raney said. “Much of it ties to worldwide supply and demand.”

Concept produced 8 million tons of metallurgical coking coal in 2007 and has control over recoverable saleable reserves and resources in excess of 57 million tons, according to information provided by ArcelorMittal. The reserves are located close to the Mid Vol Coal Group — and its 85 million tons of coking reserves — purchased by ArcelorMittal last month.

“With raw material costs continuing to soar, increasing our upstream self sufficiency in primary raw materials is a critical component of ArcelorMittal’s growth strategy,” ArcelorMittal executive Sudhir Maheshwar said in a statement. “Concept’s proximity to Mid Vol’s operations means we can draw on the strengths of both companies to increase their combined production capacity. Whilst Mid Vol’s expertise is in surface mining techniques, Concept’s expertise rests with underground mining methods. However, both operations have the potential to combine both practices. We look forward to integrating Concept’s operations into the ArcelorMittal group.”

Raney said there is “no doubt” the upswing in coal could produce a domino effect on the local economy.

Currently, there are 20,000 jobs in West Virginia directly related to coal mining and 22,000 to 23,000 jobs related to specialty contractors who serve the mines, Raney said.

Raney described living in West Virginia now as “very much like being in Alaska, where oil benefits” the residents. He noted every county and incorporated town in the state benefits from the state’s severance taxes on coal, with coal-producing communities receiving a greater share of this tax.

Kimberly Osborne, with the State Tax Department, said severance taxes for the past fiscal year, which ended June 30, were up 12 percent from last year. The taxes were up 2 percent from July to December of 2007, and rose to 20 percent from January to June.

In 2003-2004 counties and municipalities in West Virginia received $16 million in severance taxes. “This past fiscal year it almost doubled to $27.4 million,” Osborne said.

— Contact Samantha Perry at sperry@bdtonline.com

        

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