PEABODY Energy stands ready to take its $5.87bn acquisition of Anglo American’s Queensland coal assets to arbitration, claiming an underground fire has reduced their worth.
The acquisition of four coking coal operations formed a cornerstone of Anglo’s restructuring plan after surviving BHP’s takeover approach. But the transaction hit turbulence when flames ignited below ground at the Moranbah North facility on March 31.
Investor briefings held separately by both firms on 31 July exposed a stark disagreement about whether the incident qualifies as a “material adverse change” warranting contract revision, said the Australian Financial Review which first reported on the increased prospect of arbitration in an article on August 3. A showdown looms on August 19 when Peabody’s temporary suspension rights lapse.
Peabody boss Jim Grech said irreconcilable differences regarding the mine’s condition and impact scale. Four months of probes have failed to establish definitive causes, whilst questions persist over permanent resource damage, operational resumption and potential regulatory restrictions, said the AFR.
“You are going to have probable de-rates of the facility going forward because of future operating conditions,” Grech warned.
Anglo’s Duncan Wanblad rejected claims the fire triggered material change provisions, insisting underground inspections since April confirmed no resource damage and equipment remained sound. He expressed optimism about reaching agreement under existing terms whilst noting backup interest from other parties.
However, Grech signalled litigation readiness: “If we have to pursue this in arbitration we are ready to do so. We are 100 per cent confident.”
The contested mines – Grosvenor, Moranbah North, Aquila and Capcoal – sit within the Bowen Basin, globally recognised for premium steelmaking coal production.
Wanblad told Miningmx last week he was prepared to seek a solution to the dispute. “I’d really like for this deal to conclude with Peabody,” he said. “I will absolutely be pragmatic and practical. But of course, that’s not in my hands at this point in time. It’s up to Peabody,” he added.
“In the event Peabody elected not to complete, I continue to hold the view that it would be wrong,” said Wanblad. “We don’t believe there is a discount, and secondly, we had a really strong auction. If we have to take it back to auction, it wouldn’t be my first prize.”
