Peabody announced it has completed its purchase of the Shoal Creek seaborne metallurgical coal mine from private coal producer Drummond Company Inc. for $387 million. The acquisition includes the mine, preparation plant and logistical assets, and excludes legacy liabilities other than reclamation.

“This accretive Shoal Creek purchase represents a tremendous step in Peabody’s commitment to upgrade our seaborne metallurgical coal portfolio and target the highly attractive seaborne demand centers,” said Peabody President and Chief Executive Officer Glenn Kellow. “We believe the Shoal Creek acquisition clearly meets our strict investment filters, with expected high returns and rapid payback, a very attractive valuation and tangible synergies.”

Shoal Creek is located on the Black Warrior River in Central Alabama and serves Asian and European steel mills. Shoal Creek coal typically prices at or near the high-vol A index, which historically has sold at a modest discount to the Australian hard coking coal index, the company said.

The mine produced 2.1 million tons of metallurgical coal in 2017 and sold 2.4 million tons, generating $387 million in revenues, $160.8 million in net income and $161.8 million in adjusted EBITDA.

A new collective bargaining agreement was effective at closing. The new labor agreement provides for a 401(k) program. The prior multiemployer pension plan is no longer effective and related obligations are not included in the acquisition. Prior retiree healthcare liabilities were also retained by Drummond.

“We are very pleased to welcome the productive Shoal Creek workforce to the Peabody team,” said Kemal Williamson, Peabody president, Americas. “Peabody looks forward to safely and quickly integrating the mine into our portfolio and benefitting from the experienced workforce and well-capitalized nature of the operation.”

Shoal Creek has 58 million tons of proven and probable reserves with an initial 17 million tons with minimal anticipated capital requirements under the current mine plan, and additional reserves expected to be accessed with relatively low capital requirements. Shoal Creek uses longwall mining technology to mine both the Blue Creek and Mary Lee coal seams.