In a significant move to bolster its position in the global coal market, Peabody, one of the largest coal producers in the world, announced its acquisition of premium steelmaking coal assets from Anglo American plc. This transaction, valued at $2.32 billion, includes four metallurgical coal mines located in Australia’s Bowen Basin, one of the world’s richest sources of high-quality coal for steel production. The acquisition is expected to close by mid-2025, subject to regulatory approvals and customary closing conditions.
The assets Peabody is acquiring include the Moranbah North, Grosvenor, Aquila, and Capcoal mines, all of which are well-established, long-life operations with a combined resource base of 306 million metric tons of marketable reserves. These mines produce primarily hard coking coal, a key ingredient in steel manufacturing. As part of the deal, Peabody will expand its metallurgical coal production capacity significantly, with expectations to increase output from 7.4 million metric tons in 2024 to 21–22 million metric tons by 2026. This expansion will position Peabody to meet the growing demand for steelmaking coal, particularly in Asia, which is the largest market for metallurgical coal.
The acquisition is seen as transformative for Peabody, both strategically and financially. The Bowen Basin mines are strategically located near key steel-producing regions in Asia, which are projected to see continued growth in demand for metallurgical coal. Peabody’s ability to supply premium hard coking coal to these high-growth markets positions the company well for the future. The mines’ proximity to Asian markets reduces transportation costs and increases the company’s competitive advantage in serving its customers. Additionally, the transaction includes contingent payments that could increase the deal’s value, depending on favorable future developments in the coal market.
From a financial standpoint, Peabody expects the acquisition to be accretive, with substantial synergies estimated at approximately $100 million annually. These synergies will arise from efficiencies gained through office rationalization, administrative savings, and better marketing opportunities. The deal also enhances Peabody’s financial profile, as the transaction is expected to generate significant cash flow across all time periods. With an attractive enterprise-value-to-EBITDA multiple of 3.1x for 2026, the acquisition provides strong upside potential, increasing Peabody’s earnings before interest, taxes, depreciation, and amortization (EBITDA) and improving margins.
The added capacity and superior coal quality from the acquired mines are expected to enhance Peabody’s overall margins. Assuming consensus hard coking coal prices of $225 per metric ton, the company anticipates adjusted EBITDA margins of $65 to $70 per metric ton from the acquired assets. This improvement will help Peabody maintain its competitive edge in the global market while driving higher returns for shareholders. Furthermore, Peabody’s enhanced focus on metallurgical coal provides the potential for a re-rating of the company’s valuation, as metallurgical coal producers generally command higher multiples in the market due to their long-lived assets and strong growth prospects.
This acquisition is also aligned with Peabody’s broader sustainability goals. The company is committed to strengthening its sustainability practices through initiatives such as reweighting its portfolio toward steelmaking coal, which is essential for the transition to a low-carbon economy. In addition, Peabody is investing in joint ventures focused on solar power and battery storage, as well as fully funding its reclamation obligations. The company has already achieved its first reduction targets for Scope 1 and 2 emissions and plans to establish new long-term sustainability targets, including those related to the newly acquired assets.
The financial structure of the deal involves an upfront cash payment of $1.695 billion, with an additional $625 million in deferred payments to be made over four years. There are also contingent payments of up to $1 billion, depending on future events, particularly the successful restart of Grosvenor Mine and revenue-sharing agreements. The transaction is structured to ensure a balanced approach to capital allocation, with a focus on shareholder returns while reinvesting in the company’s portfolio. Peabody has secured a bridge facility to finance the acquisition and plans to obtain permanent financing in due course, maintaining a debt-to-EBITDA ratio ceiling of approximately 1.5x.
Peabody’s acquisition of these premium metallurgical coal assets from Anglo American is a strategic and financially attractive move that significantly enhances its global coal portfolio. The transaction will allow Peabody to better serve the growing demand for steelmaking coal, particularly in Asia, and capture the value inherent in one of the world's most important coal-producing regions. With synergies, improved margins, and strong financial prospects, this deal is a key step in positioning Peabody for long-term success and sustainable growth in the global coal market.
