Coal industry value collapsing

Peabody selling up in Oz (again)

Bank of America Merrill Lynch has been hired by Peabody Energy to divest its entire portfolio of Australian coal assets, as one of the world’s largest miners of the commodity
plans to stage an exit from the local market.

The mandate is the latest coup for BAML, which recently lined up a number of advisory roles in the resources space, including the sale of Newcrest’s Telfer goldmine in Western Australia and Anglo American’s coalmines in Queensland.
Questions now remain, though, as to whether the American investment bank will find a buyer for Peabody’s
portfolio and, if so, at what price.

BAML’s St Louis-based client, which is listed on the New York Stock Exchange, owns coalmines in NSW,
including the Wambo thermal coal mine, 30km west of Singleton, the Wilpinjong thermal coal mine, 40km
northeast of Mudgee and the Metropolitan coking coal mine, 30km north of Wollongong.

It also purchased Macarthur Coal in Queensland during 2011 for almost $5 billion and now owns six
coalmining operations in the state.

In boom time conditions, Peabody’s Australian assets would have been worth several billions, but now some
sources estimate that they would be worth about $1bn at the most.

Only weeks ago it offloaded its mothballed Wilkie Creek coalmine in Queensland for a meagre $10 million, a
fraction of the $600m it was once worth [sic].

Industry giant Glencore is not thought to be the most obvious buyer for Peabody’s assets because they offer
the company only extra quantity rather than a higher-quality portfolio at a time of a global supply glut, which
has been forcing down coal prices.

It is interesting to note the toll that the fallout from the weaker demand for the commodity has been taking on
Peabody’s market value in the past four years, which has fallen to $US342m, from $US19.6bn in 2011.

The company fuels about 10 per cent of the electricity generated in the US and 2 per cent globally, but it
experienced $US787m in losses last year and had its ratings downgraded to “underperform” and “negative”
by a raft of financial firms.

In 2014, Peabody’s Australian operations achieved 38.2 million tonnes of sales primarily to steel producers in
Japan, Europe, Taiwan and Korea and to electricity generators in Australia and Asia.

The company had previously told investors that its Australian platform was expanding to meet rising Asia
market demand.

EDITED BY: Bridget Carter carterb Gretchen Friemann
14 August 2015
The Australian
BAML gets nod for sale of Peabody assets

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