Anglo American set to reshape portfolio with $4.9bn coal asset sale to Peabody Energy

Anglo American has announced a landmark deal to sell its Australian steelmaking coal business to Peabody Energy for up to $4.9 billion. This significant divestment is part of Anglo American’s strategic shift towards high-growth assets, including copper, premium iron ore, and crop nutrients. The sale follows the company’s earlier announcement of the $1.1 billion sale of its stake in the Jellinbah coal operation, consolidating a broader exit from coal mining operations.

The agreement with Peabody Energy includes upfront payments, deferred considerations, and potential earnings tied to coal prices and operational milestones. The transaction is expected to close by the third quarter of 2025, pending regulatory and competition approvals.

A shift towards a streamlined business

Duncan Wanblad, Chief Executive of Anglo American, highlighted the sale as a key step in executing the company’s broader transformation strategy. He explained that the divestment aligns with a vision to create a simpler, more resilient portfolio focused on high-value, growth-oriented sectors. Wanblad stressed that the move reflects Anglo American’s commitment to achieving stronger cash flow generation while streamlining its cost structures.

The CEO added that the company remains on track with its broader transformation, which includes plans for the demerger of Anglo American Platinum by mid-2025 and the sale of its nickel business. He also outlined ongoing discussions about De Beers, noting its significant market position and potential for long-term value creation.

Wanblad described the coal business divestment as a reflection of the high quality of Anglo American’s assets, projecting that the transaction will enhance the company’s balance sheet and operational focus. He also emphasized the importance of ensuring a seamless transition for employees and local communities involved in the mining operations.

Peabody Energy sees a strategic fit

Peabody Energy’s President and CEO, Jim Grech, expressed optimism about integrating the steelmaking coal portfolio into its operations. He noted that Peabody’s existing expertise and operational values align with the assets being acquired. Grech underlined the potential for long-term value creation, pointing to the skilled workforce and strong partnerships associated with the new assets.

The portfolio includes stakes in multiple joint ventures, such as Moranbah North, Capcoal, and Dawson, alongside others. These assets provide Peabody with a strategic advantage in the metallurgical coal market, essential for steel production.

Financial details and future prospects

The $4.9 billion valuation comprises various payment structures, including an upfront $2.05 billion payment, deferred installments totaling $725 million, a price-linked earnout of up to $550 million, and contingent payments of $450 million tied to the reopening of the Grosvenor mine. The deferred payments will occur annually over four years following the deal’s closure, while the price-linked earnout is conditional upon coal prices exceeding certain benchmarks over a five-year period.

The contingent payments depend on the operational milestones of the Grosvenor mine, including coal production and sales targets. Peabody has also committed a $75 million deposit upon signing, which will be forfeited under specific circumstances if the deal is terminated.

A transformative phase for Anglo American

The sale is part of Anglo American’s broader transformation initiative, which aims to deliver significant cost savings and unlock shareholder value. The company is targeting $1.8 billion in annual pre-tax recurring cost benefits by the end of 2025.

This deal also reflects a growing trend among mining giants to divest from coal as the industry increasingly shifts towards low-carbon energy solutions. As Anglo American exits coal, the company is positioning itself as a leader in sustainable mining practices, with a focus on copper and other future-facing minerals critical for the global energy transition.

With this transaction, Anglo American reaffirms its commitment to focusing on high-growth sectors while ensuring financial resilience and stakeholder alignment. Peabody, in turn, strengthens its position in the metallurgical coal market, leveraging these world-class assets for future growth.