Asset Impairment and Restructuring

12 Months Ended

Dec. 31, 2012

Asset Impairment and Restructuring

Asset Impairment and Restructuring

NOTE 5—Asset Impairment and Restructuring

        U.S. GAAP requires that a long-lived asset group that is held and used should be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the long-lived asset group might not be recoverable. Due to reduced metallurgical coal demand and a corresponding reduction in selling prices, we reduced production at two of our three Canadian mines and at our West Virginia Maple mine in the U.S., restrained spending in our Canadian and U.K. Operations segment and significantly lowered development spending at the Aberpergwm underground coal mine in the U.K.

        In connection with the plans to reduce development spending at the Aberpergwm underground coal mine in the fourth quarter 2012, the Company recorded restructuring and asset impairment charges of $9.1 million, of which $6.0 million related to severance and other obligations and $3.1 million related to the impairment of property, plant and equipment as the carrying values of certain assets exceeded their fair value.

        In connection with the evaluation of our operating projects, management reviewed a shale natural gas exploration project that has not yet proved capable of providing commercially sufficient quantities of proven reserves to be economical. As a result of this review, management decided to indefinitely abandon this natural gas exploration project. This project was accounted for under the successful efforts accounting method under U.S. GAAP which provides that if a commercially sufficient quantity of proved reserves is not discovered, any previously capitalized exploratory costs associated with the drilling are expensed. Accordingly, the Company recorded a pre-tax charge of $40 million ($25 million after-tax) to write-off the capitalized exploratory costs associated with the natural gas exploration project in the third quarter of 2012.