Alpha: $265M Massey safety settlement near
CHARLESTON, W.Va. -- Alpha Natural Resources is close to reaching a $265 million settlement in a lawsuit it inherited over allegations that Massey Energy misled shareholders about its safety practices, the company said Thursday.
Alpha officials said "additional material terms must still be negotiated" but that the tentative deal would "close the book on the most significant Massey-related litigation issues passed on to Alpha in the acquisition."
"Whether Alpha can resolve those issues, and when, remains uncertain, but if the case can be resolved, it would staunch the uncertainty, distraction, risks and potential costs that pursuing this litigation would involve," Alpha said in a statement reporting its most recent quarterly financial results.
Alpha reported a net loss of $458 million for the three months that ended Sept. 30, citing a "tough market environment" and extended downtime during the repositioning of a longwall machine at its Cumberland Mine, in Pennsylvania.
"We are encouraged that the metallurgical coal market appears to be gradually improving from its recent apparent low point, and domestic thermal coal inventories have trended down, planting the seeds for healthier market conditions in the future," said Alpha CEO Kevin Crutchfield. "Regardless, we are not standing still and we continued to make significant progress this quarter."
In a conference call with industry analysts Thursday, Alpha said it plans another round of cuts aimed at reducing costs by at least $200 million annually in 2014.
Later in the day, spokesman Ted Pile said Alpha is eliminating about 230 positions across the company. About 130 workers will be let go, Pile said, and 100 vacant slots will be eliminated.
"This is not something we like to do at all, but it's critical, if you're in the coal business today, that you keep your cost structure competitive and you match your administrative support appropriately to your production footprint, which, for us, is considerably smaller now," Pile said.
The reductions announced Thursday come after a major restructuring and several other layoffs last year that cut more than 1,500 positions at Alpha.
The company did not identify what operations will be affected by the new round of cuts.
"The affected positions are in numerous locations spread across our entire organization and are a combination of people in jobs now and vacancies," Pile said in an email message. "We're not prepared to go into that level of detail and certainly not before affected employees have been informed."
In West Virginia, Alpha employed about 5,800 miners during the second quarter of 2013, the latest period for which figures were available Thursday. That's down from nearly 6,700 miners employed at Alpha operations during the first quarter of 2012, according to disclosures filed with the U.S. Mine Safety and Health Administration.
Overall, Alpha employs about 11,000 people, including miners and other employees, the company said.
In the lawsuit Alpha is working to settle, the Massachusetts Pension Reserves Investment Trust and other shareholders filed suit after 29 miners were killed in the April 5, 2010, explosion at Massey's Upper Big Branch Mine, in Raleigh County.
The lawsuit alleged that Massey officials misled investors by regularly touting its safety practices as among the best in the industry, while routinely ignoring government standards and systematically hiding violations from federal inspectors.
Alpha bought Massey in June 2011, acquiring the now-closed Upper Big Branch Mine and various liabilities associated with West Virginia's worst coal-mining disaster in a generation.
U.S. District Judge Irene Berger turned down Alpha's efforts to have the shareholder case dismissed, and court records indicate the parties were seeking the help of a mediator to negotiate a settlement.
Berger also delayed the litigation at the request of U.S. Attorney Booth Goodwin so that the shareholder lawsuit would not interfere with the ongoing criminal investigation of the mine disaster and Massey's safety practices.
Reach Ken Ward Jr. at email@example.com or 304-348-1702.