Friday 9th December 2022 Font size:

Cleveland-Cliffs Announces Close of PinnOak Resources Acquisition

Wednesday, August 1st, 2007

Cleveland-Cliffs Inc said it has closed its previously announced acquisition of PinnOak Resources, LLC, a premium-quality metallurgical coal producer located in the United States.
PinnOak operates two mines in West Virginia and one mine in Alabama that produce a high-quality product ideal for meeting growing worldwide demand for high-yield coking coal. PinnOak controls reserves of approximately 140 million tons.
Joseph A. Carrabba, Cliffs’ chairman, president and chief executive officer, stated: “The acquisition of PinnOak is the latest in a series of transactions designed to further Cliffs’ position as an international mining entity. Approximately 80 percent of PinnOak’s sales in 2007 are expected to reach international customers. With its position in the expanding global market, PinnOak fits well with our strategy to capitalize on international demand for steelmaking raw materials.”
Cliffs indicated it expects PinnOak production of approximately two million tons for the remainder of 2007 and approximately five million tons in 2008. As a result, PinnOak is projected to contribute approximately $130 million to Cliffs’ revenues in 2007. The acquisition is expected to produce approximately $30 million in EBITDA and have a minimal earnings impact due to acquisition and integration costs in the current year. In 2008, PinnOak is anticipated to contribute approximately $400 million to Cliffs’ revenue and $100 million in EBITDA.
Carrabba added, “PinnOak’s operations are running substantially below their rated capacity of more than seven million tons per annum. Our goal is to forge sales agreements with new and existing customers for PinnOak’s premium product and to increase production accordingly.”
As previously announced Cliffs agreed to pay $450 million in cash for PinnOak and assumed approximately $160 million in debt, which is being refinanced. Payment of approximately 25 percent of the cash portion is deferred until December 31, 2009. The agreement includes an earnout provision contingent on progressively improving performance.

< go back