A central Montana coal mine that’s seen layoffs, production cuts and permitting troubles faces more uncertainty after one of its co-owners reported taking a $362 million writedown on its investment in the mine.
Executives with Ohio-based utility FirstEnergy said the company had reduced to zero the value of its stake in Signal Peak Energy’s Bull Mountain Mine, according to a transcript of a company conference call with analysts.
FirstEnergy cited depressed coal markets, which have curbed domestic and international demand for the fuel. The company has a one-third share in the 240-worker underground mine south of Roundup.
Signal Peak spokesman Mike Dawson said Wednesday that FirstEnergy’s accounting move would not impact future mining operations. No additional layoffs or production cuts are planned, Dawson said.
Yet it comes amid mounting troubles for the mine — a major economic force in Musselshell County — and the coal industry more broadly.
More than 20 percent of Bull Mountain’s workers were laid off in December, when the company said it was scaling back production from about 8 million tons annually to 5.5 million tons.
The mine was developed in 2008 with an eye toward exporting fuel to growing markets in Asia. After several years of growth, U.S. coal exports dropped sharply over the past three years and Signal Peak is among those companies that have taken a hit.
I think the mistake they made was waiting for the market to get better and it didn’t. It got worse.
Charles Fishman, an analyst with Morningstar, a Chicago-based investment research firm
Despite the write-down reported by FirstEnergy, the company made money on the Montana mine since buying into the project at its inception for $150 million, said analyst Charles Fishman with Morningstar, a Chicago-based investment research firm. FirstEnergy sold just a portion of its stake in 2011, for $234 million.
The write-down of its remaining share of the mine was primarily an accounting matter, not a change in direction for the mine or the company, Fishman said.
“They’ve wanted to sell off their remaining interest (in Signal Peak) for some time,” he said. “I think the mistake they made was waiting for the market to get better and it didn’t. It got worse.”
Montana environmental officials recently started re-analyzing an expansion of the mine after environmentalists successfully challenged its permit because of the mine’s potential to harm local water supplies.
The state Department of Environmental Quality must finish its work within six months under an agreement reached last month between the agency, Signal Peak and the Montana Environmental Information Center.
Bull Mountain is one of the largest mines in Montana and is responsible for about one of every five jobs in Musselshell County, according to a recent report by the Headwaters Economic Institute of Bozeman.
The mine has an estimated 431 million tons of coal in its reserves. Its other owners are Wayne M. Boich of Ohio and Gunvor Group, a global commodities trading company based in Switzerland.