NACCO Industries (NC) Announces Notification Of Contract Mining Agreement Termination For The Navajo Mine
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NACCO Industries, Inc.® (NYSE: NC) announced today that it received notification on June 17, 2021 that the contract mining agreement between Bisti Fuels Company, a wholly owned subsidiary of NACCO, and the Navajo Transitional Energy Company ("NTEC") will be terminated effective September 30, 2021.
Bisti Fuels currently supplies coal from the Navajo Mine to the Four Corners Power Plant through the agreement with NTEC. NTEC will assume control and responsibility for operation of the Navajo Mine upon termination of the contract mining agreement. All liabilities, including mine reclamation, are the responsibility of NTEC. As required under the agreement, it is anticipated NTEC will pay NACCO a termination fee of approximately $10 million.
Bisti assumed operation of the Navajo Mine on January 1, 2017, and between 2017 and 2020, Bisti contributed pre-tax earnings between $4.5 million and $5.8 million annually. Excluding the termination fee, the termination of the contract mining agreement does not materially impact NACCO's outlook for 2021, but it will have a material unfavorable effect on NACCO's long-term earnings. The contract was scheduled to expire in 2031, with seasonal operations, and reduced coal production levels, beginning in the third quarter of 2023.
"While this is a disappointing outcome, we recognize that our customer, NTEC, has the capabilities to manage this operation, and has made a business decision to do so. We are proud of our employees, and the work they have accomplished during our oversight of the Navajo Mine. We empowered employees to greatly improve the safety culture, and act as strong stewards for environmental excellence," said J.C. Butler, President and CEO of NACCO and The North American Coal Corporation.
During North American Coal's tenure as operator of the Navajo Mine, the operation received the Sentinels of Safety Large Coal Processing Award from the National Mining Association, the Excellence in Surface Coal Mining Reclamation Award from the U.S. Department of the Interior's Office of Surface Mining Reclamation and Enforcement, the National Mineral Education Award, the National Mine Safety and Health Training Award, and the Community Outreach Award from the Interstate Mining Compact Commission, as well as the Excellence in Reclamation Award from the New Mexico Energy, Minerals and Natural Resources Department for STEM related outreach and education.
Mr. Butler added, "As described in our 2020 annual report, we remain steadfastly focused on our two key strategies, Protect the Core and Grow and Diversify. We are working diligently to support our North American Coal customers, and we continue to execute on key initiatives developed over the last several years as part of our strategy to Grow and Diversify. We are purposefully and deliberately diversifying into other businesses that leverage our core skills, capabilities and reputation. We are building a strong portfolio of affiliated businesses for growth and diversification through North American Mining which is rapidly building a business focused on aggregates and non-coal mineral production, Catapult Mineral Partners which is driving growth in our Minerals Management segment, and Mitigation Resources of North America which is focused on providing environmental offset solutions."
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