US coal producer Peabody Energy has agreed to acquire the bulk of coking coal assets that UK-South African mining firm Anglo American is seeking to divest as it exits the coal sector.
Peabody plans to buy Anglo's majority stakes, at up to $3.8bn, in four metallurgical coal mines — Moranbah North, Grosvenor, Aquila and Capcoal — located in Australia's Bowen Basin, with the transaction expected to close by mid-2025 and subject to customary closing conditions, the producer said in a statement.
With the acquisition of coal mines, Peabody's combined US-Australia production will rise from 10.6mn short tons/yr at present, to an estimate of 11.3mn st/yr (10.25mn t) by 2026, according to Peabody, strengthening the producer's position in the premium hard coking coal (PHCC) market.
Moranbah North, Grosvenor and Aquila are PHCC mines, while Capcoal produces a combination of PHCC, pulverised coal injection (PCI) and other coal grades.
At present, Australian low volatile hard coking coal, or tier-2 coking coal, accounts for 55pc of Peabody's 7.4mn st in coking coal sales, but the acquisition of new assets will bring PHCC's share up to 51pc and reduce its tier 2 coal to 24pc. Peabody also produces high volatile A coal in the US, accounting for 12pc of sales this year.
In addition to the sale of assets to Peabody, Anglo has agreed to sell the Dawson mine in Central Queensland to Indonesian mining company PT Bukit Makmur Mandiri Utama (BUMA) for $455mn.
Earlier this month, Anglo agreed the sale of its 33pc share of the [Jellinbah Group coking coal joint venture]https://direct.argusmedia.com/newsandanalysis/article/2624965) to partner Australia-based Zashvin at $A1.6bn ($1.04bn).
In May, Anglo announced plans to exit its coal, platinum, nickel and diamond businesses shortly after rejecting repeated takeover bids from Australian resources firm BHP.
These deals come against a backdrop of a challenging price environment for steel making and subsequent weakness in coking coal prices, implying tight margins for coal producers. After reaching a high of $336.50/t fob Australia, the premium low volatile coking coal fell steadily throughout this year to reach $176.50/t in September, before recovering to remain in the $201-208/t range for most of November.
In addition to a less than friendly investment climate for coal projects, Australia's Queensland state and New South Wales(NSW) state governments increased royalties on coal sales in 2023 and 2024 respectively, putting further strain on Australian miners already facing inflationary pressure from wages, equipment and fuel costs.
Lower coking coal prices this year have translated to reduced royalty payments, but have yet to stem the tide of consolidations and asset sales as mining companies exit the sector.
In August, Australia-based diversified metals producer South32 completed the sale of its Illawarra coking coal operations in NSW to an entity owned by Singapore-based Golden Energy and Resources (Gear) and Australia's M Resources for $1.65bn.
In the US, rising mining costs and weak seaborne prices for most of this year led to the closure of smaller high-cost operations and mergers such as that of Arch Resources and Consol Energy to form Core Natural Resources, expected to close by the first quarter of 2025.
In July, trading firm Glencore completed its acquisition of a majority stake in Elk Valley Resources, the coking coal division of Canadian mining firm Teck Resources, growing the former's thermal and coking coal production to 130mn t/yr.
