Tom Clarke can only be called an optimist, perhaps a maverick who struck lucky timing acquisitions of US met coal mines ahead of unforeseen global price rebounds.
The environmentalist under his Virginia Conservation Legacy Fund may have been the perfect cover for global investors in his strategic plan to scoop up North American and other coal and iron ore, steel assets at low valuations in a perfect cyclical play.
"If Wall Street had tried to do the deals it would have been different -- there was no capital available, some kind of other way had to be found," Tom Clarke told S&P Global Platts in an interview just before the Christmas break. Clarke, a charismatic 61 year-old healthcare administrator and hospital executive, moved into coal through interests in conserving parts of Virginia.
He turned coal mine distressed plays on its head with his later swoop into coking coal assets, ahead of what were huge price rises to come for the commodity.
APPALACHIAN TIES
Living in the Appalachians, he saw first hand the change in fortune for the coal industry. With the repercussions blighting his region, helping the coal industry was a driving force, he said.
Clarke dug deep into the coal industry, first in October 2015 when VCLF grabbed an array of thermal coal assets during Patriot Coal's bankruptcy sale, paying nothing up front but absorbing over $400 million in liabilities tied to the properties.
The plan was primarily an environmental play.
ERP Compliant Fuels, VCLF's new affiliate, took control of Patriot's Federal and Hobet coal mining complexes in West Virginia and the rights to about 150 permits of closed and yet-to-be mined sites.
Work would begin to reclaim Hobet and other already closed mines, but coal production would continue at Federal with a twist -- selling carbon credits.
Clarke aimed to bundle federal coal and sell it at a premium with the carbon offsets attached via a reforestation project in the Lower Mississippi Alluvial Valley managed and measured by the company GreenTrees.
More trees would be planted on newly reclaimed land at former Patriot mine sites in Appalachia, creating even more carbon credits that, ultimately, Clarke hoped could be used to offset carbon emissions under the US Environmental Protection Agency's pending Clean Power Plan.
Utilities, though, showed no real interest in buying expensive coal, and many industry players questioned whether the carbon offsets would be accepted under the yet-to-be implemented federal plan.
Before the end of 2015 Clarke was again adding to the company's coal footprint, but this time expanding into the met business with the acquisition of Cliffs Natural Resources' Oak Grove Mine in Alabama and Pinnacle Mine in West Virginia.
Similar to the Patriot deal, ERP paid nothing upfront for the Cliffs mines and instead assumed liabilities of about $268 million.
The Cliffs deal spurred an even deeper incursion into the met and steel side of the coal industry in February 2016 when, through Walter Energy's bankruptcy, ERP acquired the high-vol producing Maple Mine in West Virginia and coke plant in Alabama.
Then in September, ERP took over Walter Energy Canada's assets, including the Brule, Wolverine and Willow Creek operations in British Columbia, through yet another bankruptcy sale.
Prior to buying the former Walter Energy-held idled Canadian PCI and HCC mines, the small Rockies foothill base of Tumbler Ridge was described as fast turning into a depressed shadow of its former self.
His team managed to get PCI output and vessels loaded for sale to Asia within the quarter, with the last two Capesizes loading over the holidays.
CAREER SHIFT
An accountant by training, entering the steel raw materials industry later in life and his ability to manage complex multiple transactions of distressed coal mines in the US and Canada and a coke plant in Alabama have left many scratching their heads.
His business partner Ken McCoy, who is CEO of their joint company ERP Compliant Fuels, is a former United Coal Company and Arch Coal executive.
McCoy is credited as an investor and equity shareholder, like Clarke of a joint majority of their companies, but more importantly is described as the mastermind in planning new mine operations and improvements at their restarted and acquired mines.
Both had strong ties to unions, being members from an early age in mining and carpentry worker affiliations and say they found solutions to prevent the coal industry in the Appalachians rotting away. The United Mineworkers of America invested in the Federal Mine.
In the run of deals, there was never any other investor mentioned, no higher strategic counsel and veteran investor from the inside, other than advisers hired for each deal.
ERP is said to have explored opportunities as far afield as the troubled steel plants of Port Talbot, Wales, and the giant ILVA complex in Taranto, Italy.
Clarke had always said his entities had finalized asset purchase transactions with Cliffs Natural Resources and Walter Energy at cents on the dollar, by negotiating with banks and other debtors and offering the best upside, including offering royalty lines.
"We left the companies to share in the gains if the benchmark went up, and we have already paid money back to them," Clarke said.
His optimistic plans are carried out partly by coal and coke industry workers facing a market downturn and too young to retire.
For these assets, a return to break even and operating at small margins is at the fore, with improved efficiencies and cost cuts by redesigning mining and processing plans.
While Clarke as CEO of VCLF and his joint ownership of ERP companies has been the main public face of the group, industry insiders have long doubted the ability for a newcomer to snag such deals, turnaround the mines and survive.
Spot met coal prices have swung in Clarke's favor in the second half of 2016, boosting planned returns as prices swelled, particularly for exports, and new 2017 domestic business. However, the ERP plans don't depend on sky-high prices and the current price rebound sticking, he added.
IRON ORE PELLETS
Now Clarke is seeking to move downstream as well as sideways into iron ore with his latest deal picking up Minnesota-based pellet producer Magnetation.
As his group aligns interests in thermal and coking coal, blast furnace and foundry coke, iron roe pellets and later possibly steel, the companies will be able to span the ferrous and steel raw materials and solid fuels markets.
"We want to be supporting the steel mill," he said. "Expect more transactions to be closing, and perhaps more related to steel going forward."
While Clarke pursues more acquisitions, a corporate and marketing reorganization for his groups' assets is underway.
An industry investor source sees Clarke as a genuine value investor who fell onto a deal-making structure tying the environment and liabilities around coal mines with the potential to pick up operating assets at rock bottom prices to pay for them. The strategy worked. Deal by deal, ERP amassed more and more assets.
"I've never seen anybody behind Clarke, other than the operating side of his companies," the source said. Companies and banks were desperate to divest and offload liabilities, and using a series of asset-holding companies made sense, he added.
As for Clarke, what really puzzled coal industry insiders with how and why an outsider gave an industry left for dead his time and energy stemmed from his resume, at least what is stated to date.
"Tom Clarke is founder of Kissito Healthcare International and President & CEO of parent company Kissito Healthcare. Tom has held leadership positions within large academic teaching hospitals in the University of Massachusetts Medical School system, including those of Associate Administrator and CFO," Kissito said on its website.
Clarke has focused on quality and operation improvements for a wide range of post-acute healthcare environments for over the last 19 years, it added.
Clarke in 2014 was recognized by the Virginia Chapter of The Wildlife Society, for his exceptional contributions to wildlife conservation in the state with the A. Willis Robertson Award.
He works in Roanoke, close to the Natural Bridge property, and donated a conservation easement to protect the bridge, and established the start of transferring the property to become Natural Bridge State Park.
