Boston, MA 06/02/2014 (wallstreetpr) – Peabody Energy Corporation (NYSE:BTU) entered into an agreement with Singapore-based Bentley Resources to sell its Willkie Creek Mine for ~$70 million of cash, situated in Queensland, Australia. The other associated liabilities and obligations like port and rail are subject to certain conditions.
Reason For The Asset Sale
1. Non-Performing Asset
The Australian mine was a non-performing asset and the year over year loss incurred from the mine compressed the overall margin significantly. Therefore, the Company stops its operation and looking for a prospective buyer to dispose of the asset.
During the first quarter of 2014, Peabody’s net earnings improved, as a result, of the discontinuation of the Willkie Creek Mine operation. The mine has incurred the loss of $5.6 million during 1Q2013.
Therefore, The Company ceased the production of the mine during December 2013. The associated liability including potential port and rail take or pay was $31.6 million as of March 31, 2014.
2. Improve Operating Margin
During the first quarter 2014, Australian mining segment reported lower revenue $612 million, as a result, of lower pricing for both metallurgical and thermal coals and the effect of changes in volume and mix.
Subsequent to lower revenue, and high cost of sales and the ongoing commissioning at North Goonyella Mine compressed the adjusted EBITDA of the segment to $1.8 million. Moreover, the discontinuation of Wilkie Creek Mine provides positive earnings for the segment.
Conclusion
Peabody is reshaping the asset base so to make its presence in the high growth market. The demand for the global coal market remains high with increasing demand, but, the continued supply of seaborne coal led to decline its price.
Therefore, the Company plans to invest in high growth assets and divest non-performing assets. Recently, Peabody has gone through three major acquisitions and expands the mine in Australia and expands its operation in China and Magnolia and stopped its Queensland and Appalachia operations.
