Peabody buying Excel Coal

St. Louis-based coal producer Peabody Energy (BTU-N) has agreed to a cash deal to take over Australian coal producer Excel Coal (EXL-A) for about US$1.5 billion.

The offer is for A$8.50 per share, or US$6.21, making US$1.34 billion in cash, and Peabody will assume US$190 million in Excel debt. Excel’s board has recommended the offer to shareholders.

Excel operates three mines in New South Wales and has a large coking-coal development project, Millennium, near existing mines held by Peabody’s Peabody Pacific subsidiary in Queensland. In all it has about 500 million tonnes in metallurgical and thermal coal reserves, putting Peabody’s acquisition cost near US$3 per tonne.

In 2005 Excel produced 5.6 million tonnes of coal, and at year-end (Excel’s fiscal half-year) the company had turned a net profit of A$24.5 million on revenues of A$171 million. In its third quarter, which ended March 31, Excel produced 1.46 million tonnes of saleable coal.

Its steam coal operation, Wambo, west of Newcastle, N.S.W., mainly produces for export at long-term fixed-price contracts. Two other New South Wales mines, North Wambo and Metropolitan, produce coking coal both for export and for domestic sale.

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