Peabody to acquire Shoal Creek met coal mine for $400 million

Monday, 24 September 2018 21:54:22 (GMT+3)   |   San Diego
       

Peabody announced it has signed a definitive agreement to purchase the Shoal Creek metallurgical coal mine from private coal producer Drummond Company, Inc. for $400 million. Shoal Creek is located on the Black Warrior River in Central Alabama and serves Asian and European steel mills with high-vol A coking coal.  

The transaction involves the purchase of the mine, preparation plant and supporting assets, and excludes legacy liabilities other than reclamation.  The purchase price is subject to customary working capital adjustments. Closing is expected prior to the end of 2018 and is subject to regulatory approvals, certain conditions precedent, including negotiation by Drummond of a collective bargaining agreement with the union-represented workforce, and other customary conditions.

Shoal Creek represents the next phase of Peabody's initiative to upgrade its metallurgical coal platform.  The mine adds approximately 2 million tons per year of high quality hard coking coal sales that are expected to expand Peabody's met coal volumes and margins, with costs comparable to Peabody's average met coal range.

Additionally, Shoal Creek is strategically positioned on the Black Warrior River with direct access to barge transportation, eliminating trucking or rail requirements.  The mine accesses seaborne markets through the Port of Mobile in the Gulf of Mexico serving Asia-Pacific and European steel mills. 

The Shoal Creek Mine was developed in 1994 and employs a workforce of approximately 400.  The current mine plan accesses 17 million tons of reserves under a minimal-capital plan.  Shoal Creek uses longwall mining technology to mine both the Blue Creek and Mary Lee coal seams, with low capital investment requirements.  Transportation is accommodated through loading Panamax and Cape-sized vessels at the McDuffie Terminal in Mobile, Ala. with substantial available capacity. 

In 2017, the mine sold 2.1 million tons.  Shoal Creek's mining costs per ton approximate the average cost of Peabody's metallurgical coal platform.  Shoal Creek coal typically prices at or near the high-vol A index.  Peabody intends to revise its guidance targets on relevant key metrics following closing of the transaction. 


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