Peabody Energy has signed a definitive agreement to purchase the Shoal Creek metallurgical coal mine located on the Black Warrior River in Alabama from private coal producer Drummond Co. Inc. for $400 million. Shoal Creek serves Asian and European steel mills with high-vol A coking coal.

Peabody will purchase the mine, prep plant and supporting assets. The agreement excludes legacy liabilities other than reclamation. The transaction is expected to close before the end of 2018.

“Peabody has consistently outlined our intention to upgrade our metallurgical coal platform and make strategic investments using a strict set of filters,” said Peabody President and CEO Glenn Kellow. “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.”

Shoal Creek represents the next phase of Peabody’s initiative to upgrade its metallurgical coal platform, adding approximately 2 million tons per year (tpy) of high-quality hard coking coal sales, the company said. The mine is strategically positioned with direct access to barge transportation, eliminating trucking or rail requirements. The mine accesses seaborne markets through the McDuffie Terminal in Mobile with substantial available capacity.

Shoal Creek employs 400 and uses longwall mining technology to mine both the Blue Creek and Mary Lee coal seams. The current mine plan accesses 17 million tons of reserves. In 2017, the mine sold 2.1 million tons.