Peabody Energy hires Amicaa for BHP coal competition

BHP coal operations.

The Elliott Management-backed Peabody Energy has hired advisory firm Amicaa to compete for BHP’s coal mines, currently up for sale through Macquarie Capital, Goldman Sachs and UBS.

Also working for Peabody, which counts Elliott as its largest investor, is Bank of America.

Amicaa is run by the former Australian head of investment banking for Bank of America David Wood and has counted Peabody as a long-term client.

Peabody, supported by Elliott, is competing against Indonesian rivals BUMA and Sinar Mas Group in the final stages to buy the BHP coal portfolio.

Also thought to have re-entered the competition after being knocked out of the first round is Australian-listed coal company New Hope.

Final bids are due at the end of July.

On offer is BHP’s Mt Arthur thermal coal mine in NSW and two metallurgical coal mines in Queensland, held as part of an alliance agreement with Mitsui Coal known as BMC.

BHP recently announced that the 33.3 per cent stake it owned in its Cerrejon thermal coal mine in Colombia was offloaded to existing shareholder Glencore for $US294m in a deal advised by JPMorgan.

Peabody is the fifth largest coal producer in Australia with thermal and metallurgical mines in NSW and Queensland.

The understanding is that its offer involves some cash, but may be by way of a creative structure that sees the coal assets wind up within the Peabody Energy business.

Some suspect that the BHP portfolio could sell for about $2bn, but the dilemma for Australia’s mining giant is that it wants to distance itself from the commodity at a time when buyers are not paying up for coal assets despite the commodity price being at a high level and the fact that they are generating strong cash flow.

Elliott owns about 30 per cent of Peabody.

The US group is also a BHP investor, with a holding of about 5 per cent, and it is the activist group that lobbied for the global mining giant, listed in Australia and Britain, to abandon its dual-listed structure and put pressure on the company to sell its shale gas assets in the US.

BHP is looking at a sale or a demerger of the assets as part of a commitment to diversify away from the coal industry, which is not seen in a favourable way by investors, worried about its impact on the environment.

Most banks will not fund thermal coal acquisitions despite the commodity price recently hitting record levels.

Newcastle thermal coal is trading at about $US143.40 a tonne – its highest level since 2010 – while the price of metallurgical coal has been trading at about $US198 a tonne.

Meanwhile, BUMA is Indonesia’s second-largest coal mining contractor, while Sinar Mas Group – the controlling company of Golden Energy in Singapore - owns most of Australia’s Stanmore Coal.