April 14, 2010 | Mark Paradies

Cost of a Major Accident: Massey To Suffer Financial Consequences After WV Coal Mine Disaster

I always try to share the costs involved in major accidents. Here’s another example:

http://www.dailyfinance.com/story/investing/mining-accident-could-take-heavy-financial-toll-on-massey-energy/19430278/

Here’s a quote from the article:

Morningstar equity analyst Michael Tian notes that, depending on the level of damage caused by the explosion, Massey will have to spend millions either to rehabilitate or seal the Big Branch mine. Lost production from the mine will drag down projected earnings for the Massey. Since company filings revealed that Massey does not carry business interruption insurance, any financial losses due to production stoppages will be translate directly onto the company’s bottom line. If Massey is found at fault, the company is also likely to be hit with millions of dollars in fines, and lawsuits connected to the explosion could potentially cost it hundreds of millions more.

‘In the past, tragic accidents like this have brought the scrutiny of the federal government, which mandated more safety equipment, training, and mine modifications,’ said Tian. ‘These regulations did much to raise the cost of mining in Appalachia over the past few years, and history could repeat itself.’

If new safety regulations increase the cost of mining coal, Massey’s profitability will undoubtedly be affected, as would that of other companies in the industry.

Also, the article said:

“…concerns about Massey Energy’s environmental issues have moved Bank of America to end its relationship with the company…”

Massey Energy has a reported $1 billion in debt, and like most large companies, needs financing to continue operating.

Wow! That’s some cost.

Can you convince your senior management to invest in improved safety? Let’s hope so.

By the way, if you want to learn to get sponsorship by senior management of safety improvement efforts, then attend the TapRooT® Summit and hear Don Harrison’s keynote talk: “Getting Sponsorship Right”. For more info, see:


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