Still More Bad News for Ambre

Would-be coal exporter scrambles for cash as legal deadline approaches.
This post is 8 in the series: Coal Exports: Caveat Investor
Photo credit Joe Gratz, cc.

Photo credit Joe Gratz, cc. Courtroom One Gavel by Joe Gratz used under CC BY-NC 2.0

The bad news for Australian coal miner Ambre Energy has been flying fast and furious for the past few weeks.

Back in late June came the revelation that the company’s Morrow Pacific coal export project faces high costs and dim financial prospects—which was inadvertently confirmed by the company’s North American CEO.

Then, at the very end of last week came news that the company is running out of time to settle its ongoing lawsuit with rival Cloud Peak, with whom Ambre co-owns the struggling Decker coal mine in southestern Montana. Worse, Ambre is clearly having trouble coming up with cash for the settlement.  From Matt Brown at the Associated Press:

More signs of problems have emerged with an Australian company’s bid to take over a Montana coal mine, as court documents reveal Ambre Energy has been unable to come up with more than $70 million in cash to close on the deal…

Cloud Peak and Ambre said in court documents that their ability to close the sale depended on “Ambre’s ongoing financing efforts to obtain cash collateral.” That cash is needed to cover $70.7 million in outstanding reclamation and lease bonds for the mine that are held by Cloud Peak.

We covered the legal dispute between Ambre and Cloud Peak in our report earlier this year on Ambre’s dismal finances. At the time, it struck me that the settlement terms were incredibly generous to Cloud Peak: Ambre was already struggling financially when it offered to give Cloud Peak more than $130 million for one-half of a money-losing mine. (No wonder Ambre’s having so much trouble raising money for the venture!) The judge has signaled that she’s losing patience: if Ambre can’t come up with the cash for the Decker settlement in the next month and a half, she’s going to force the two parties to put their lawsuit back into motion. That would just increase the uncertainty and headaches for Ambre.

Oh, and in yet another setback, a judge has denied a key motion filed by Ambre in its lawsuit with its former investment banker. That means millions more in potential liability for Ambre.

The thing is, these are all problems of Ambre’s own making. I’m sure their spin doctors will try to claim that their financial woes are somehow the fault of a slow permitting process or environmental opposition. But the truth is far more mundane: Ambre pursued a high-risk strategy that would only work if coal prices stayed high. Now that international coal prices have fallen through the floor, their risky strategy simply can’t attract investors.  End of story.

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