In a boost for Peabody Energy, which in April sought Chapter 11 bankruptcy protection in a U.S. court, the company announced May 9 that several of its Australian subsidiaries have entered into sale and purchase agreements with Australia-based Pembroke Resources.
Pembroke is a portfolio company of leading energy and resources-focused global private equity firm Denham Capital. Under this deal, St. Louis-based Peabody Energy would sell its interest in undeveloped metallurgical reserve tenements in Queensland’s Bowen Basin for A$104 million in cash plus a royalty stream.
Peabody has received cash proceeds of A$65 million as part of the transaction, with an additional A$22 million of cash proceeds anticipated to be received before the end of the third quarter of 2016, once certain governmental and regulatory approvals are granted. The remaining proceeds are related to the sale of select tenements held by the Coppabella-Moorvale Joint Venture (CMJV) and are subject to approval by the CMJV partners and other conditions.
The transactions include the Olive Downs South, Olive Downs South Extended, Willunga and Olive Downs North tenements, which consist of undeveloped SEC-reported proven and probable reserves (as of Dec. 31, 2015) totaling approximately 165 million tons on a net basis to Peabody.
Said Peabody; “The sale is part of Peabody’s overall portfolio management strategy, one of a range of measures the company is taking to improve the business across three core priorities of operational, financial and portfolio. The reserves are not assigned to active mining operations within Peabody’s core Australia region. The agreement contains no financing condition, with Denham Capital providing all funding for the transaction. Peabody expects to use transaction proceeds for general corporate purposes.”
Peabody’s Australian operations sold 35.8 million tons of metallurgical and thermal coal in 2015 and control 861 million tons of coal reserves.
Peabody Energy is the world’s largest private-sector coal company and the largest U.S. coal producer. Peabody, succumbing to the same forces that recently forced other industry giants like Arch Coal and Alpha Natural Resources into bankruptcy, on April 13 voluntarily filed petitions under Chapter 11 for the majority of its U.S. entities in the U.S Bankruptcy Court for the Eastern District of Missouri.
Through this process, the company said it intends to reduce its overall debt level, lower fixed charges, improve operating cash flow and position the company for long-term success, while continuing to operate under the protection of the court process.