It’s no secret that in recent years, the coal mining industry has taken a serious hit. So, why in the world would anyone want to buy a coal mine? According to a 2014 article by Tim Loh on Bloomberg.com, thermal coal still produced 39 percent of U.S. electricity in July of 2014. Not to mention, the Washington Post announced earlier this year that the first clean-coal plant officially became operational in Texas, which brings hope to the coal industry if other mines can follow suit in the technology. So, if you’ve been looking to get into this market, now may be the time to buy. In today’s article, we discuss how to buy a coal mine.
How to Buy a Coal Mine
Start with research
Before you would begin any project, you should always do your research. This is especially true when you are about to embark on a feat such as this. One major aspect you will want to consider before buying is location. What is the state’s major form of energy? How is electricity primarily powered? What is production like? Is there room for growth? Will you keep their staff or hire your own employees? Take a look at Indiana’s numbers in the early 2000’s, for example. You can see here what information they have laid out for interested patrons.
Have the funds (and a lot of them)
Of course, we hope you would assume that it would take a lot of money to buy a coal mine. But, be prepared to spend millions for your investment. A new mine, as stated by the Indiana Center for Coal Technology Research (CCTR) can cost anywhere from $50 million to $300 million. To purchase a mine already developed, you are likely to spend less on those that were not as productive, particularly if you time your buy well enough. Make sure you have a plan in place, though, to bring production up once in your hands. And, once you do buy the mine, it is suggested to have enough funds to support operations for six months or more until money is a little more stable.
Know the industry
Along with research on locations and production, you shouldn’t buy a coal mine unless you are familiar with the industry. While this may seem like an obvious statement, investors may be overly excited to jump on what appears to be new opportunities with the new clean coal efforts without knowing the rules of coal mining and the cost for distribution and operating first. Some buyers may even want to buy coal mines to transition them to renewable energy producers. Regardless of your goals, you will still need to know the industry, even beyond coal.
Find reliable dealers
Costs of equipment to mine the coal can add up, and if you are purchasing an existing coal mine you will want to evaluate whether or not their equipment dealers were the best in price, quality, and reliability. There are many suppliers who still provide quality without overcharging you. And, regardless of the optimism that may be currently felt for coal, every penny counts in this business.
Find the mines for sale
One of the easiest ways to find mines for sale is the internet. By doing a simple Google search, you can see what operations are looking for buyers. One popular site is simply called MineListings.com. You can also stay up-to-date on coal mining news, such as deals that fall through, on Mining.com.
The steps on how to buy a coal mine can be complicated as different countries have different regulations and rules. Also know that the buying process is not simple as it will take many negotiations, including employee contracts, and at least a year or two before the sale is finalized. Much of the process, however, is similar to starting or taking over any new business: have a plan, know how you’ll cover your costs, know how to handle business transactions, and know the industry.
Have you considered buying a coal mine before? Feel free to comment below or start a conversation in the forums.
