Anglo’s R68 billion deal under threat

Peabody Energy shares rose after the company said it’s reviewing a deal worth up to $3.78 billion (R68.37 billion) to buy Anglo American’s steel-making coal business after a fire at an Australian mine. 

Peabody will consider “all options related to its acquisition” and remains in talks with Anglo about a so-called “ignition event” that caused an evacuation of workers at the Moranbah North Mine in Queensland, Peabody said in a statement Tuesday after regular market hours. Its shares were up about 13% at 9:57 a.m. in New York. 

If the fire qualified as a “material adverse change” it’s possible that Peabody could walk away from the deal or negotiate new terms, Jefferies analysts led by Christopher LaFemina said in a note to clients Wednesday morning.

“The consensus view is that Peabody would be best off if it could walk as the risks and the implied valuation are too high,” according to the analysts. 

The jump in Peabody shares also reflects, in part, broader market optimism about US coal after President Donald Trump on Tuesday signed measures to promote its use.

Still, it’s unclear whether the new initiatives will dramatically shift the landscape for coal, which has declined for years in the face of competition from low-cost natural gas and renewable power.

Last week, staff at the Anglo site evacuated “following an overpressure event at the longwall face,” the London-based company had previously said. A fire broke out at the underground coal mine, ABC News reported, citing a union official.

The incident could be a test of Anglo’s wider restructuring plan in response to an unsolicited takeover proposal by BHP.

The sale of coal operations was viewed as the most straightforward first step, while Anglo has also agreed to sell its nickel mines and is on track to spin off its platinum unit.

Anglo continues working with Peabody toward completion of the transaction announced in November, including providing information on the suspension of mining operations, an Anglo spokesperson said in an emailed statement. 

The deal was set to propel Peabody toward the handful of producers that dominate the seaborne market for steelmaking coal, even as the International Energy Agency expects demand for the fuel to fall through 2027.

Currently, the BHP Mitsubishi Alliance joint venture and Glencore Plc are the biggest producers.

A worsening trade war between the US and China — the world’s top steel producer — threatens to further curb consumption of the fuel used to melt iron ore.

Peabody agreed to buy Anglo’s assets under a plan to significantly shift its product mix and focus on metallurgical coal.

Anglo has been seeking to simplify its business around core commodities after rebuffing a $49 billion takeover approach from BHP Group in 2024. 

Anglo had said last year it would receive $2.05 billion in cash upfront from Peabody. Other payments were dependent on issues including the coal price and the reopening of the Grosvenor mine, which halted production following an explosion and fire in June.