Peabody Energy To Buy Coal Mine On Black Warrior River

Peabody Energy Inc., the St. Louis, Mo.-based thermal and metallurgical coal producer, announced September 21 that the company has signed a definitive agreement with Drummond Company Inc. to purchase the Shoal Creek metallurgical coal mine, located on the Black Warrior River in Central Alabama. The announced sale price for the mine is $400 million. Shoal Creek is a key source of high-vol A coking coal for the Asian and European steel markets, with the coal transported by barge down the Warrior-Tombigbee Waterway and exported through the Port of Mobile, the third largest coal port in the nation.

Peabody expects to complete the purchase of the mine before the end of the year.

“Peabody has consistently outlined our intention to upgrade our metallurgical coal platform and make strategic investments using a strict set of filters,” Peabody President and CEO Glenn Kellow said in a statement. “We believe the purchase of the well-capitalized and high-quality Shoal Creek Mine meets these filters, offers major logistical advantages and represents an opportunity to create significant value.

“The acquisition allows us to expand volumes and margins from our met coal platform, enhances our scale and offers complementary products to customers,” he continued. “We applaud the Drummond team for developing a high-quality operation, and we look forward to advancing that reputation for excellence.”

According to Peabody, the sale includes the mine, preparation plant and supporting assets, but excludes legacy liabilities other than reclamation. The purchase is subject to regulatory approvals and Drummond negotiating a collective bargaining agreement with the mine’s union-represented employees.

Peabody expects the mine to produce about 2 million tons of high quality hard coking coal, which the company will use to expand its metallurgical coal volumes and margins. The company highlighted the waterway and waterborne commerce connections of the mine.

“Shoal Creek is strategically positioned on the Black Warrior River with direct access to barge transportation, eliminating trucking or rail requirements,” Peabody said in the announcement of the purchase agreement. “The mine accesses seaborne markets through the Port of Mobile in the Gulf of Mexico service to Asia-Pacific and European steel mills. … The acquisition will further enhance Peabody’s exposure to highly attractive, growing seaborne demand centers.”

Drummond opened the Shoal Creek Mine in 1994. At its height, the mine employed more than 800 workers, although the workforce now stands at about 400. In 2017, about 2.1 million tons of coal were sold from the mine. According to Peabody, the mine currently has access to about 17 million tons of reserves from the Blue Creek and Mary Lee seams within the Warrior Coal Basin. Coal from the mine is exported from the Port of Mobile’s McDuffie Terminal.

Shoal Creek is the largest coal mine in Alabama. With a depth up to 1,300 feet, the mine goes directly underneath the Black Warrior River and extends into Jefferson, Walker and Tuscaloosa counties.

Coal has always been a significant cargo for the Warrior River. In 2014, total tonnage on the Black Warrior-Tombigbee Waterway (BWT) was 21.1 million tons, with coal accounting for 9.1 million tons. Coal tonnage dropped to 6.7 million tons in 2016 and accounted for 38 percent of total tonnage on the waterway, but that was with a major mine shut down. While tonnage stats have been somewhat flat on the BWT the past three years, observations at the locks on the system so far in 2018 seem hopeful.

“Information from our navigation locks indicate tonnage on the waterway is rebounding and should be increasing in 2018,” said Danny Hensley, operations project manager for the BWT and Alabama River Waterways for the Corps of Engineers.

Larry Merrihew, president of the Warrior-Tombigbee Waterway Association, said Peabody’s purchase of the Shoal Creek Mine demonstrates not only the value of coal as a natural resource but also the value of Alabama’s ports and waterways to business and industry.

“That is good news for the river, as we have the capability to handle more barge traffic without having to expend any capital dollars,” Merrihew said. “Then too, the Port of Mobile has a major coal handling facility with capability to expand. Our transportation system is one of the finest in the United States.”