Peabody headquarters. Credit: Peabody Energy, Inc.

Global pure-play coal firm Peabody has signed an agreement to purchase the Shoal Creek metallurgical coal mine located on the Black Warrior River in Central Alabama, US from Drummond, in a deal valued at $400m.

High-vol A coking coal produced at the Shoal Creek is supplied to Asian and European steel mills.

As part of the transaction, Peabody will acquire the mine, preparation plant and supporting assets.

Subject to certain conditions, including regulatory approvals, the transaction is anticipated to be completed by the end of this year.

Peabody president and CEO Glenn Kellow said: “Peabody has consistently outlined our intention to upgrade our metallurgical coal platform and make strategic investments using a strict set of filters.

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“We believe the purchase of the well-capitalised and high-quality Shoal Creek Mine meets these filters, offers major logistical advantages and represents an opportunity to create significant value.

The transaction will add annual sales of around two million tonnes of high quality hard coking coal, which the company hopes will expand its met coal volumes and margins.

“Peabody has consistently outlined our intention to upgrade our metallurgical coal platform and make strategic investments.”

The company intends to leverage the location advantage of Shoal Creek, which has direct access to barge transportation, to serve growing demand markets.

Furthermore, the acquisition is expected to offer multiple synergies and seamless integration into Peabody’s operating and SG&A platforms.

Developed in 1994, the Shoal Creek mine has around 400 employees and the current mine plan accesses 17 million tons of reserves.

Shoal Creek, which uses longwall mining technology, had sales of 2.1 million tonnes last year.