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Company buying Pa. coal firm

Russian steelmaking giant to pay $1.3 billion for Somerset County company that has large reserves.

SOMERSET — Russian steelmaking giant OAO Severstal on Friday announced plans to buy Pennsylvania’s PBS Coals for about $1.3 billion in cash.

Severstal will buy PBS by purchasing a public company, PBS Coals Ltd., that will be created when Penfold Capital Acquisition Corp. buys PBS, the steelmaker said. The boards of PBS and Penfold support the deal.

PBS mines, processes and sells coal in Somerset County, about 60 miles southeast of Pittsburgh. It operates six underground and six surface mines near Severstal’s North American production centers. The mines have the capacity to produce more than 4 million tons of metallurgical coal per year, Severstal said.

One PBS mine, Quecreek, became known worldwide in July 2002 when nine miners bored into a flooded abandoned mine chamber and became trapped underground. The miners, who were working with faulty and outdated maps, were underground for more than three days before being rescued one by one through a hole drilled into the ground.

The Severstal acquisition is part of growing trend among international steel companies looking to tie up coal and other raw materials.

Many U.S. steelmakers spun off their coal operations after the domestic industry bottomed out in the 1980s and have been slow to buy up to coal reserves controlled by companies like PBS.

Luxembourg-based ArcelorMittal, the world’s largest steel producer, recently bought a bigger piece of Australia’s Macarthur Coal and bought Mid Vol Coal Group, which boasts 85 million tons of reserves and mines producing some 1.5 million tons of coal in West Virginia and Virginia.

International mining conglomerate BHP Billiton Ltd. and Korea’s Posco are also acquiring or shopping for coal supplies.

“In addition to its significant reserves, PBS has an experienced management team and a competitive cost position among international coal producers,” Severstal said in a statement announcing the deal.

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