Peabody Energy said on Monday if issues involving Anglo American’s Moranbah North mine were not resolved to its satisfaction, it may elect to terminate its pending deal to acquire some of the British mining company’s Australian steelmaking coal assets.
Peabody’s shares were up over 4% in early trading.
Production at Anglo American’s Moranbah North coal mine – located in the Bowen basin in Queensland, Australia – was suspended after an underground fire broke out at the mine in March.
The mine is included in the assets deal signed between the companies last year.
Peabody said it has issued a Material Adverse Change (MAC) notice to Anglo American. A MAC clause refers to a significant negative development affecting the target company between the signing and closing of a deal, potentially allowing the buyer to terminate the agreement.
“A substantial share of the acquisition value was associated with Moranbah North, yet there is no known timetable for resuming longwall production,” Peabody chief executive officer Jim Grech said in a statement.
Peabody said it may walk away from the deal, if the issues at the mine were not resolved within the timeframe specified under the acquisition agreements.
Anglo American in response said it does not believe production stoppage at the mine constitutes a Material Adverse Change to its agreed upon deal with Peabody.
The company will continue to work with Peabody to satisfy the remaining conditions required to complete the deal, Anglo added.
Jefferies analysts said in a note they expect Monday’s development to “significantly” push back the closing of the transaction and even affect the “likelihood of this transaction going through at all”.
(By Mrinalika Roy; Editing by Krishna Chandra Eluri and Shinjini Ganguli)
