(Bloomberg) -- Anglo American Plc agreed to sell its steelmaking coal business to Peabody Energy Corp. for a fee that could rise to as much as $3.78 billion, as the miner’s restructuring gathers pace.
Anglo is looking to dramatically simplify — and shrink — its business in a move that was announced during a successful rebuttal of a $49 billion approach from BHP Group earlier this year. For Peabody, the deal will significantly shift its product mix as the US miner seeks to focus on metallurgical coal.
Anglo’s plan to sell its coal operations was seen as the most straightforward first step in its transformation process — which also involves exiting platinum, nickel and selling or spinning off De Beers — but it was hampered by an explosion and fire at Grosvenor, the largest of its five Australian mines.
“The sale of our steelmaking coal business is another important step towards delivering the strategy that we set out in May to create a world class copper, premium iron ore and crop nutrients business,” Anglo Chief Executive Officer Duncan Wanblad said in a statement announcing the sale Monday.
Anglo shares rose as much as 2.9% in London trading, while Peabody fell as much as 2.2% in New York.
For Peabody, the deal will propel it toward the handful of producers that dominate the seaborne market for steelmaking coal. Currently the BHP Mitsubishi Alliance joint venture and Glencore Plc are the biggest producers.
It also marks a remarkable turnaround for Peabody. The company previously filed for bankruptcy protection in 2016, part of a wave of US miners that were hit by cheap gas prices. Since then, Peabody has sought to grow in the international coking coal market and tried to buy other Australian assets in 2022.
Peabody expects to produce about 7.4 million tons of met coal this year, and adding the Anglo mines will boost production to as much as 22 million tons in 2026, according to a statement.
Anglo said it would get $2.05 billion in cash upfront from Peabody, a US coal miner, with another $725 million in deferred payment. The company could receive a further $550 million depending on the coal price and $450 million depending on the reopening of its Grosvenor mine. Indonesia’s BUMA will take control of the Dawson mine as part of the disposal.
The business spans five mines in Queensland, which together produced 16 million tons of coking coal in 2023. More than a dozen potential buyers ran the rule over the assets. Anglo previously sold a $1.05 billion stake in another Australian coal mine.
Anglo is now set to focus on plans to spin off its majority stake in Anglo American Platinum Ltd., which it expects to complete next year. It is also looking to exit nickel mining.
Plans to sell or spin off De Beers have been complicated by a steep downturn in the diamond market. Anglo would prefer to wait for a recovery as the company believes De Beers should command a price that reflects its status as a trophy asset.
--With assistance from Will Wade.
(Updates shares in fifth paragraph.)
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