Peabody to consolidate thermal coal strength with Arch Coal JV

United States-based coal major Peabody Energy has secured a joint venture (JV) agreement with Arch Coal that will consolidate the companies’ Powder River Basin and Colorado assets.

Peabody Energy reported the deal would combine the companies’ thermal coal assets to strengthen “the competitiveness of coal” against rival sources such as natural gas and renewables, while also unlocking value for shareholders.

The deal, which requires approval by regulators, will join the resources of Peabody’s North Antelope Rochelle, Rawhide and Caballo mines with Arch Coal’s Black Thunder and Coal Creek mines (Powder River Basin), West Elk and Twentymile (both Colorado).

Peabody president and chief executive officer Glenn Kellow called the JV “an extraordinary example of industrial logic” that would strengthen the competitive position of the company’s products.

“The transaction unites two strong, culturally aligned workforces with a commitment to core values such as safety and sustainability,” Kellow said.

“We believe this joint venture allows us to offer enhanced products and security of supply for customers, increased value for shareholders, greater efficiencies for railroads, long-term opportunities for employees and strength for the communities in which we operate.”

The deal holds pre-tax net present synergy value of $US820 million ($1.2 billion) and is expected to save the companies around $US120 million a year in combined operational costs over a 10-year period. The JV will be 66.5 per cent owned by Peabody and 33.5 per cent owned by Arch.

“We are excited about this transaction’s potential to enhance the value of Arch’s top-tier thermal coal assets,” Arch chief executive officer John Eaves said.

“This new joint venture should allow us to realise the full potential of our valuable assets in the Powder River Basin and Colorado and benefit our customers in the process.

“The significant operating synergies will enhance the competitiveness of these assets and also enable us to continue to generate long-term, sustainable returns for our shareholders.”

While Peabody Energy originated in the US state of Missouri, it also owns several Australian thermal coal operations in New South Wales and Queensland.

Notably, the company is focusing on a restart of the North Goonyella coal mine in Queensland, which was closed in September 2018 due to a fire.

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