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Further industry restructuring likely in US

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World Coal,

Tighter self-bonding requirements for US coal companies could speed up industry restructuring, according to Fitch Ratings.

“Notice by the Wyoming Department of Environmental Quality’s Land Quality Division that Alpha Natural Resources (ANR) and its operating affiliate, Alpha Coal West Inc., no longer qualified for the self-bonding programme and that the companies had 90 days to provide substitute bonding could be another blow to distressed coal if not rescinded,” the ratings agency said in a market commentary.

ANR estimates that self-bonding by coal companies currently operating in Wyoming to be US$2 billion. While this amount could be replaced by other bonding within 90 days, said Fitch, it would further reduce liquidity for coal companies whose earnings and cash flows have been hit by weak coal prices and high interest expenses over the past three years.

Liquidity would further be tightened should other mining regions follow suit.

Fitch Ratings anticipates further restructuring in the coal industry “given unsustainably high debt balances over the near term.”

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