GILLETTE — A last-minute motion from Blackjewel LLC is asking the U.S. Bankruptcy Court to add a condition to the sale of the Eagle Butte and Belle Ayr mines in Wyoming to Eagle Specialty Materials.

While it’s not expected to affect the sale of Blackjewel’s Western assets, the late Monday motion adds another condition to the sale for ESM’s parent company, FM Coal, to also assume about $100 million worth of reclamation obligations on already-defunct Blackjewel Eastern properties.

That’s because Lexon, a bonding and insuring company, holds those Eastern reclamation bonds and is being asked by ESM to provide bonding for about $230 million worth of reclamation obligations attached to the Eagle Butte and Belle Ayr mines.

Lexon won’t take on all of that itself, so to free itself up for the Western bonding is requiring FM Coal to assume those permits in Appalachia.

It’s something FM Coal, Blackjewel and government agencies have been discussing for some time, said a person with knowledge of the negotiations who asked not to be identified.

While making those Eastern properties part of the deal for the Western assets wasn’t in the original plans, “It’s not a surprise,” the source said, adding that “it’s a collective desire of everyone to make sure the state isn’t left holding the bag. … The goal is to get all this stuff cleaned up and stop having this black eye on the industry.”

There are other terms involved, but those weren’t disclosed.

The bottom line, according to Blackjewel’s court motion and the source, is that the sale to Eagle Specialty Materials is still on track to close as early as Wednesday.

“Subject to the approval of this court, … an affiliate of ESM’s parent will acquire the Eastern permits and assume the associated reclamation obligations so that ESM can obtain the bonding needed to close the sale of the Western assets, which is now expected to take place on Wednesday, Oct. 9, 2019,” the motion says.

ESM was given final court approval to buy the mines last week in a deal that would see it receive $90 million from Contura Energy to assume the reclamation obligations.

Eagle also will pay Blackjewel $16.2 million in cash; pay $22 million to Blackjewel’s senior debt holder, Riverstone Credit Parters; pay any unpaid bills and debts incurred during the bankruptcy up to about $4.3 million; make the employees whole by paying any unpaid wages and benefits owed.

Eagle also will repay 50% of the county production taxes Blackjewel owes.

Monday’s late motion about the Lexon bonding comes less than 48 hours after a weekend court filing that confirms the federal government has been investigating Blackjewel LLC since before it filed for bankruptcy July 1.

The company has been subpoenaed in the government’s “investigating potential violations of the False Claims Act” by Blackjewel, according to court documents. Because the company continues to go through its bankruptcy process, the government is asking the court to extend a deadline to allow the company to discharge all of its debts and dissolve through Dec. 4.

 

By Greg Johnson

Gillette News Record Via Wyoming News Exchange