Peabody announced that it has completed its purchase of the Shoal Creek seaborne metallurgical coal mine from private coal producer Drummond Company, Inc. for $387 million, reflecting customary purchase price adjustments. The acquisition includes the well-capitalized mine, preparation plant and logistical assets and excludes legacy liabilities other than reclamation.
Shoal Creek is located on the Black Warrior River in Central Alabama and serves Asian and European steel mills. Shoal Creek coal typically prices at or near the high-vol A index, which historically has sold at a modest discount to the Australian hard coking coal index.
The mine produced 2.1 million tons of metallurgical coal in 2017 and sold 2.4 million tons, generating $387.0 million in revenues, $160.8 million in net income and $161.8 million in Adjusted EBITDA. Shoal Creek has realized 54 percent gross margins through the first nine months of 2018 on 2.0 million tons produced and 1.9 million tons sold, with realized revenues of $173 per ton, costs of $80 per ton1, net income of $162.1 million and Adjusted EBITDA of $163.3 million.
Shoal Creek has 58 million tons of proven and probable reserves with an initial 17 million tons with minimal anticipated capital requirements under the current mine plan, and additional reserves expected to be accessed with relatively low capital requirements. Shoal Creek uses longwall mining technology to mine both the Blue Creek and Mary Lee coal seams. The mining complex offers significant logistical competitive advantages. Its location on the Black Warrior River provides direct access to barge transportation to the McDuffie Terminal in Mobile, Al., where Panamax and Cape-sized vessels are loaded.