Anglo American’s restructuring plans have been dealt a major blow after Peabody Energy backed out of a R70bn deal to buy the miner’s steelmaking coal assets, setting the stage for a high-stakes, unwanted court drama for CEO Duncan Wanblad.
This is the biggest setback to Anglo’s restructuring ambitions since the group announced its intention to focus solely on copper, iron ore and crop nutrients last year.
The hiccup tests Wanblad’s ability to salvage one of the final pieces of the puzzle in what he has said represents the most radical changes to Anglo in decades.
Wanblad responded to the news by saying that a legal showdown could soon be on the cards.
“We are confident in our legal position and will shortly initiate an arbitration to seek damages for wrongful termination,” he said in a statement.
It came just two weeks after Business Day reported that the US-based Peabody was no longer willing to pay the full purchase price of $3.8bn (R67bn) after a fire in March grounded operations at Moranbah, one of the key mines in the deal.
Moranbah is the largest of the four Australian steelmaking coal mines, which Anglo announced in November would be sold to Peabody as part of its restructuring. Before the fire, the acquisition was scheduled to close in April this year.
In the five months since the incident, Anglo has repeatedly argued that the pause in production at Moranbah did not constitute a material adverse change (MAC), a clause that would allow Peabody to back out of the deal.
“Our view is supported by the lack of damage to the mine and equipment, as well as the substantial progress made with the regulator, our employees and the unions, and other stakeholders as part of the regulatory process towards a safe restart of the mine,” Wanblad said on Tuesday.
“In fact, just in the last week, we achieved a further important milestone, with our workforce signing off the risk assessment that underpins the restart strategy. We are therefore very disappointed that Peabody has decided not to complete the transaction,” he said.
However, Peabody in May issued a material adverse change notice to Anglo, essentially giving itself an avenue to withdraw from the deal should the issues it identified at Moranbah not be addressed.
“The two companies did not reach a revised agreement to cure the MAC that compensated Peabody for the material and long-term impacts of the MAC on the most significant mine in the planned acquisition,” Peabody CEO Jim Grech said on Tuesday. “Peabody has chosen to terminate the transaction and will continue to execute our plans to create substantial value from our diversified global asset portfolio.”
Discouraging signal
Peabody’s decision to walk away from the deal does not bode well for Anglo’s prospects of finding another buyer willing to cough up $3.8bn for the West Australian mines, as the failed transaction sends a discouraging signal to other potential investors.
In a statement on Tuesday, Peabody sounded alarm bells over the sluggish and costly resumption of mining operations at Moranbah since the fire.
“Anglo estimates $45m per month of holding costs at Moranbah North,” the coal producer said. “The mine was previously targeted to produce 5.3-million tonnes of saleable production in 2025, yet there is no timetable for the resumption of longwall production at forecasted volumes and costs.”
Wanblad was confident that Anglo would find an alternative sales process to extract value from its coal mines in due course. “We held a very competitive process to sell this high-quality parcel of steelmaking coal assets in 2024, and the unsolicited inbound interest expressed to us in recent months is testament to the strategic value of these assets and the attractive long-term market fundamentals,” he said.
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