US coal producer Peabody Energy (NYSE: BTU), the world’s largest privately owned producer of the fossil fuel, said Friday it had agreed to buy Shoal Creek metallurgical coal mine in central Alabama from Drummond Co. for $400 million.
Located on the Black Warrior river, the mine serves the Asian and European steel mills with high-vol A coking coal.
The transaction involves the purchase of the mine, preparation plant and supporting assets, excluding legacy liabilities other than reclamation. The buying price is subject to working capital adjustments and regulatory approvals, but the deal is expected to close by the end of 2018, the company said.
“Peabody has consistently outlined our intention to upgrade our metallurgical coal platform and make strategic investments using a strict set of filters,” President and CEO Glenn Kellow said in the statement. “We believe the purchase of the well-capitalized and high-quality Shoal Creek Mine meets these filters, offers major logistical advantages and represents an opportunity to create significant value.”
The acquisition allows the St. Louis-based miner expand volumes and margins from its metallurgical coal platform, Kellow noted.
Developed in 1994, the Shoal Creek Mine has a workforce of about 400 and the current mine plan accesses 17 tonnes of reserves. The mine sold 2.1 million tonnes of coal in 2017.
US coal production began rising in mid-2016, boosted by higher global prices that were mainly due to production cutbacks in China. It also benefited from coal becoming more competitive in the utility mix after natural gas — a rival power-plant fuel — rebounded from historically low prices hit in 2016.