Jefferson County coal mine to be bought for $400 million

Source: Birmingham Business Journal

A private Birmingham coal producer is selling a coal mine in Jefferson County to a major public company.

Peabody (NYSE: BTU) is purchasing Shoal Creek metallurgical coal mine from Drummond Company Inc. for $400 million. The purchase price is subject to customary working capital adjustments.

Located on the Black Warrior River in Adger, Shoal Creek provides Asian and European steel mills with high-vol A coking coal.

“Peabody has consistently outlined our intention to upgrade our metallurgical coal platform and make strategic investments using a strict set of filters,” said Glenn Kellow, Peabody president and chief executive officer, in a news release. “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.”

Peabody is buying the mine, preparation plant and supporting assets. Legacy liabilities other than reclamation are not part of the transaction, which is expected to close before the end of 2018.

“Peabody’s acquisition of Shoal Creek adds another productive metallurgical coal mine to the company’s platform,” said Benjamin Nelson, vice president and senior credit officer at Moody’s Investors Service. “We view the deal as credit positive based on expectations that Peabody will fund the transaction with cash, maintaining its strong liquidity and positioning the company for stronger cash flow.”

The deal is subject to regulatory approvals, certain preceding conditions, which includes Drummond’s negotiations of a collective bargaining agreement with the union-represented workforce, the United Mine Workers of America.

“As always, the UMWA’s mission is to keep our members working in good, safe jobs so that they can provide for their families. We will continue to do that no matter who the owner of the mine is,” said UMWA International President Cecil E. Roberts. “We are in negotiations for a new collective bargaining agreement that is fair and equitable to both sides prior to this sale.”

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. In 2017, the mine sold 2.1 million tons.

Credit Suisse and Lazard are acting as financial advisors for the transaction.

Peabody is a global pure-play coal company and a member of the Fortune 500, serving power and steel customers in more than 25 countries on six continents.

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