Essar buys Trinity Coal for $600 million

The Essar Group, through its subsidiary Essar Minerals, Delaware, and Denham Capital, an energy and commodities-focussed global private equity firm, on Saturday announced that they had signed a definitive agreement by which Denham would sell its ownership of Trinity Coal Partners LLC to Essar for $600 million.

Trinity is a leading U.S. coal producer with operations in the Central Appalachian region. Among the top 10 U.S. coal producers, it owns and operates mines in Kentucky and West Virginia and has a proven resource base of about 200 million tonnes of coal — split equally between metallurgical coal and steam coal. It now produces about 7 million tonnes of coal annually and plans to ramp up production to 10 million tonnes annually.

Denham acquired Trinity in January 2005 and during its ownership, it more than doubled the reserves and increased the productive capacity from about 1.7 million tonnes to 9 million tonnes. Trinity operates six mining complexes with a total of 10 surface mines, three underground mines and six highwall miner units in the Central Appalachian coal basin.

The transaction is part of Essar's strategy to continue to achieve backward integration and secure raw material needs for its global steel and power operations. Its steelmaking capacity of 14 million tonnes is spread across Canada, India and Indonesia. It also owns iron ore reserves of over 1.4 billion tonnes in Minessota, U.S. It is also scaling up its power generating capacity in India to 6,000 MW.

Essar Group Chief Executive Prashant Ruia said, “Trinity Coal will be an excellent addition to our North American business, ensuring that we become an integrated player in the region. Access to Trinity's vast coal reserves and the opportunity to work with a team of skilled personnel will take us closer to our vision of becoming one of the lowest cost steel producers in the world.''

“The acquisition is a continuing of our strategy in North America over the years. We earlier bought the 2.5-million tonne Algoma Steel in Canada for $1.8 billion and have increased the capacity to 4 million tonnes. Four months ago, we also commissioned a 85-MW waste heat treatment power plant there. In the U.S., we bought Minnesota iron ore mines with 1.4 billion tonne reserves. We are proposing to invest $1 billion in the first phase for a beneficiation and pelletisation plant. In the second phase, we will invest in a steel plant to make slabs.''

He further added that the Aegis BPO acquired earlier employs 4,500 people and serves large U.S. clients. “We are the largest Indian company in North America employing 8,500 and have committed or invested $ 4 billion there.''