Published: August 16, 2008 10:19 pm            

PBS eyes infusion of cash

Coal company hopes to use public dollars toward expansion

A Somerset County coal mining company expects it will be ready to go public as early as next month, according to its top executive.

Robert Scott, president of PBS Coals Corp. in Friedens, told The Tribune-Democrat that the company hopes to issue its initial public offering on the Toronto Securities Exchange in September. Scott would not comment on how much the offering might raise, but industry analysts speculate the mining company could see a capital infusion of nearly $300 million.

Scott said the money raised through the stock offering will allow the company to move forward with its planned expansions of two deep mines in Somerset County and to renovate a coal cleaning facility in Stonycreek Township.

The company, which employs about 550, earlier this month received a state grant of $895,000 toward the cost of the expansion.

“It will be substantial,” Scott said of the amount of capital the company expects to raise by going public.

“It should be enough to take on the expansion plans we discussed with Gov. Rendell, the Cambria cleaning plant. That should create about 165 new jobs. We’ve already hired 110 in anticipation of that expansion and we have them in training so they’re ready to go when the new mines are ready.”

PBS is striking while the iron is hot as metallurgical coal, one of the company’s primary products, is shooting up in price.

Scott said developing nations such as China and India are consuming large amounts of steel as they industrialize. The increased steel demand is creating a much stronger demand for metallurgical coal, one of the primary components in steelmaking.

“We have some of the best metallurgical coal in the world in Somerset County and the demand has increased greatly,” Scott said.

“We could keep operating as we are and be fine, but we see a great opportunity to add new jobs,” he said. “And the market is there right now to expand the business and create jobs.”

Scott wouldn’t look too far into the company’s future, preferring to focus on the company’s current situation and strategy. But he said some cursory discussion has taken place about the future of the company and additional expansion beyond the current plans.

He said the most significant part of the infusion of public dollars is it will allow the company to better position itself to produce coal well into the future. He said the company currently controls fields holding about 250 million tons of mineable coal.

“We hope to be shipping about 5 million tons a year after expansion,” Scott said. “As you can see, we have many, many years of life ahead of us, and we continue to acquire new reserves to add to our base. Someone estimated a few years back that we have about 2 billion tons of coal here, so there’s quite a bit of coal to mine.”

PBS Coals is currently owned by PBS Group, a Toronto-based holding company. Once the transition to a public company is complete, the company’s name will change to PBS Coals Limited and 136,418,103 shares of common stock will be issued on the Toronto market.

Scott said the company did not choose the Toronto exchange due to the ownership connections in that city.

“For one, the size of company we are and the U.S. being such a huge country, we don’t really show up on the radar screen,” Scott said.

“Toronto works with smaller-sized companies like us. Plus, they have a history of being very receptive to energy and mineral companies. You go where people want you, and we’re a good fit for that exchange.”

        

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