U.S. coal miner Peabody Energy has paused its $5 billion fundraising effort to acquire Anglo American’s coal assets in Queensland, citing uncertainty over a major mine fire that could derail the deal.
Peabody said the fire at the Moranbah North mine, the largest in Anglo’s Queensland portfolio, may represent a “material adverse change” under the terms of the agreement reached last November. The mine has been closed since the fire broke out on March 31, and it remains unclear when production will resume.
This is the second fire to hit Anglo’s Queensland operations in under a year. The nearby Grosvenor mine also caught fire in June and is still offline.
JPMorgan analyst Dominic O’Kane said Peabody’s move could delay, renegotiate, or even collapse the deal. He added it might also disrupt Anglo’s broader restructuring plans and make the company vulnerable to another takeover attempt after BHP’s failed bid last year.
Peabody’s Chief Financial Officer Mark Spurbeck said the company had initially seen strong interest from investors to support the deal. However, the uncertainty around Moranbah North has caused talks to stall. “Until further clarity is noted, our financing is on hold,” Spurbeck said.
Chief Executive Jim Grech added that there was no timeline for restarting long wall production at the site, a method used in underground coal mining that extracts large sections of coal in one operation. He noted that based on past mine fires, delays could be longer than expected.
Peabody has given Anglo 10 days to respond formally to the material adverse change notice and up to 90 days to fix the issue during a “cure period.” If the matter is not resolved, Peabody could walk away from the agreement.
Anglo American rejected the claim that the fire constitutes a material adverse change. The UK-based miner said it had reentered the site on April 19 and was working with safety regulators to plan a safe restart of operations.
“We expect to continue working with Peabody to address its concerns,” Anglo said in a statement.
The deal was originally agreed when Australian premium coking coal was trading at $220 per tonne. Prices have since fallen to $188, adding further pressure to the transaction.
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