South32 Drops Plan to Buy Peabody Mine -- Update
April 17 2017 - 7:26PM
Dow Jones News
By David Winning
SYDNEY--South32 Ltd. (S32.AU) said competition concerns had
scuttled a US$200 million deal to buy a metallurgical coal mine in
the southern coalfields of Australia's New South Wales state,
together with a stake in a coal port, from Peabody Energy Corp.
(BTU).
South32, the coal and metals miner spun out of BHP Billiton Ltd.
(BHP.AU) in 2015, agreed in November to buy Peabody's Metropolitan
Colliery and an associated 17% stake in the Port Kembla Coal
Terminal, located south of Sydney.
On Tuesday, South32 said the deal won't proceed following the
Australian Competition and Consumer Commission's concerns that the
proposed deal may substantially reduce competition in coal supply
to Australian steelmakers.
"South32 has always maintained that metallurgical coal is a
globally traded commodity," the company said in a regulatory
filing. "Given this, South32 is not prepared to make significant
concessions in favor of Australian steelmakers that would likely be
required to mitigate the competition concerns."
The underground mine, which has a capacity to produce 2.3
million metric tons of coal a year, is six miles to the east of
South32's Appin Colliery mine.
South32 already manages the Port Kembla Coal Terminal on behalf
of a consortium of miners that includes Glencore PLC (GLEN.LN).
South32's planned deal with Peabody also involved setting up a
mechanism to share the benefits of further possible strength in
coal prices, whereby extra cash flow would be split on sales above
agreed prices.
"We are surprised that South32 and the ACCC reached an impasse,
given both the physical synergies and the global nature of the
metallurgical coal markets," said Peabody President and Chief
Executive Glenn Kellow. "On the other hand, we see continuing
opportunities given Metropolitan's quality coking coals and port
location, and our objective will be to operate the mine while
maximizing returns in the international marketplace."
Write to David Winning at david.winning@wsj.com
(END) Dow Jones Newswires
April 17, 2017 19:11 ET (23:11 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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