A globally diversified mining and metals company has received the nod to buy an underground coal mine in New South Wales.
South32 will acquire Peabody Energy’s Metropolitan Mine, 42km north of Wollongong for US$200 million.
The two companies have entered into a definitive agreement to sell the mine and its associated 16.67 per cent interest in the Port Kembla Coal Terminal. The transaction also includes a contingent value right that enables Peabody to realise additional cash proceeds should future metallurgical coal prices remain in excess of an agreed “forward curve” for a period of approximately 12 months following completion.
The sale also is expected to release Peabody of approximately $20 million in financial assurances, in the form of bank guarantees and cash that will be replaced by South32 upon completion.
“This sale supports our actions to strengthen the Australian portfolio, which remains core to Peabody, and is consistent with the strategy outlined in our business plan,” Peabody president and chief executive officer Glenn Kellow says.
‘”We expect the transaction to be accretive to the value reflected in the business plan, generate meaningful proceeds for the Australian business, decrease future capital expenditure needs, and reduce risk to the Australian platform as we pursue a smaller but more profitable portfolio going forward.”
The mine uses underground longwall mining techniques to extract the coal, which is transferred by conveyor to the major surface facilities area. Coal is transported by train to the Port Kembla Coal Terminal for shipping to domestic and overseas customers.
“The Metropolitan Colliery is a natural fit within our portfolio and the acquisition is consistent with our strategy to invest in high quality mining operations where we can create value. The mine’s recently upgraded infrastructure and close proximity to Illawarra Metallurgical Coal will enable us to further optimise performance and unlock unique blending and resource synergies. We look forward to the Metropolitan team joining South32,” South32 CEO Graham Kerr says.
Metropolitan Coal employs about 250 mine site workers and produced 2 million tons of saleable coal during 2015. The sale is not expected to impact on mine staff, workforce or community because South32 promises to share similar core values of safety, operations and sustainability.
Back in 2009 Peabody’s Board approved the $70m Metropolitan Coal Project Expansion, and in June the same year, the New South Wales Government approved an upgrade to the existing operations.