Anglo American mulls legal action after Peabody abandons coal deal

Anglo American PLC said on Tuesday it intends to seek damages after Peabody Energy Corp’s ‘wrongful termination’ of its bid to acquire Anglo American’s steelmaking coal assets in Australia.

This came after the New York Stock Exchange-listed Peabody announced on Tuesday that it has dropped its plan to buy steelmaking coal portfolio from Anglo American nearly five months after an ‘ignition event’ at the Moranbah North mine on March 31.

Anglo American temporarily suspended mining operations at Moranbah North following the fire.

In a statement on Tuesday, Anglo American Chief Executive Officer Duncan Wanblad said the fire does not constitute a ‘material adverse change’, under the definitive agreements with Peabody. The two signed agreements on November 25 that would have seen Peabody take over coal business for $3.78 billion.

‘This belief is reinforced by the lack of damage to the mine or equipment and the clear progress being made within the rigorous and structured regulatory process towards restarting the mine,’ said Wanblad, noting that the company is ‘very disappointed’ that Peabody has decided not to complete the transaction.

‘We continue to reserve our rights under the definitive agreements, we are confident in our legal position and will shortly initiate an arbitration to seek damages for wrongful termination,’ Wanblad said.

But Peabody maintained that the ‘ignition event’ at Moranbah North amounts to a ‘material adverse change’, noting that the exact cause of the fire remains unknown, with no definitive timeline to resuming sustainable longwall production.

‘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 Chief Executive Officer Jim Grech said.

Before the March 31 incident, the acquisition had been scheduled to close in April this year, Peabody said in a statement.

The Peabody transaction would have seen Anglo American exit coal business. Late in January, it concluded the sale of the sale of its minority interest in Jellinbah Group Pty Ltd to Zashvin Pty Ltd for about $1.0 billion. Jellinbah is a joint venture that owns a 70% interest in the Jellinbah East and Lake Vermont steelmaking coal mines in Australia.

Anglo American’s Wanblad it continues to focus on the safe restart of Moranbah North.

‘We are confident that we will successfully conclude an alternative sales process for value in due course,’ he said.

Shares in Anglo American were up 2.4% to 2,183.00 pence on Tuesday in London, and they rose 2.4% to R 520.32 in Johannesburg.

In pre-market trade on Tuesday in New York, Peabody shares rose 6.9% to $18.28.

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