Peabody acquires Shoal Creek coal mine for $387m

4 December 2018 (Last Updated December 4th, 2018 11:01)

Peabody has closed the acquisition of Drummond Company’s Shoal Creek seaborne metallurgical coal mine, located on the Black Warrior River in Central Alabama, US, for $387m.

Peabody acquires Shoal Creek coal mine for $387m
Shoal Creek coal mine uses longwall mining technology. Credit: Peabody Energy, Inc.

Peabody has closed the acquisition of Drummond Company’s Shoal Creek seaborne metallurgical coal mine, located on the Black Warrior River in Central Alabama, US, for $387m.

The agreement for the mine purchase was signed in September this year. The acquired assets include the mine, preparation plant and logistical assets; however, it excludes legacy liabilities other than reclamation.

Coal produced from the Shoal Creek mine is exported for use in steel mills of Asia and Europe.

Last year, the mine produced 2.1 million tonnes of metallurgical coal. Its sales stood at 2.4 million tonnes, while revenues were at $387m.

Peabody president and CEO Glenn Kellow said: “This accretive Shoal Creek purchase represents a tremendous step in Peabody’s commitment to upgrade our seaborne metallurgical coal portfolio and target the highly attractive seaborne demand centres.

“We believe the Shoal Creek acquisition clearly meets our strict investment filters, with expected high returns and rapid payback, a very attractive valuation, and tangible synergies.  We believe the transaction offers significant strategic and financial benefits for Peabody in our ongoing drive to create additional shareholder value.”

According to the company, the mine could be integrated into its operations with minimal friction costs. The existing mine plan includes minimal anticipated capital needs for drawing an initial 17 million tonnes from Shoal Creek’s estimated 58 million tonnes of proven and probable reserves.

“The Shoal Creek acquisition clearly meets our strict investment filters, with expected high returns and rapid payback.”

Developed in 1994, the mine uses longwall mining technology to mine hard coking coal located in both the Blue Creek and Mary Lee seams.

As the mine is located on the Black Warrior River, it has access to barge transportation to the McDuffie coal Terminal at the Port of Mobile in Alabama, where coal is exported to clients across the globe.

The acquisition is part of the Peabody’s strategy to upgrade its metallurgical coal platform and will add sales of around two million tonnes per year of hard coking coal.