US coal major Peabody Energy on Friday announced the $400-million acquisition of the Shoal Creek metallurgical coal mine, in central Alabama, from private producer Drummond Company.
Located on the Black Warrior river, the mine serves the Asian and European steel mills with high-vol A coking coal and in 2017 sold 2.1-million tons.
"Peabody has consistently outlined our intention to upgrade our metallurgical coal platform and make strategic investments using a strict set of filters. 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," said president and CEO Glenn Kellow.
Outlining the “strategic and financial benefits” of the acquisition, he said that Shoal Creek would add about two-million tons a year of high-quality hard coking coal sales at costs comparable to Peabody's average met coal range.
Its location on the Black Warrior river gives the mine direct access to barge transportation, eliminating trucking or rail requirements. The acquisition will also enhance Peabody's exposure to growing seaborne demand centers.
Peabody said that the transaction, which would be funded by cash, would close before the end of the year. It 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.
The Shoal Creek mine was developed in 1994 and employs a workforce of about 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.