Peabody Energy Gets Winsway As New Partner In Mongolian Venture
Peabody Energy (BTU) got a new partner in its Mongolian joint venture Thursday, as Winsway Coking Coal Holdings Ltd. exercised an option to buy out Polo Resources Ltd.’s (POL.LN) 50percents share.
Mongolia contains deposits of coal burned by power plants and the higher-margin coal used in steelmaking, and it benefits from its location near China. Producers around the globe have been raising output of the higher-margin coal, also known as coking or metallurgical coal, to take advantage of rising prices driven by Asian steel production.
The three companies agreed in May to give Winsway the right to acquire Polo Resources" stake for usd35 million--usd15 million up front and usd20 million payable within a year of the sale. Polo was to receive a 1percents royalty for coal sold from the venture under current agreements, with payments not exceeding usd50 million or continuing longer than 25 years. Winsway was the largest offtaker of Mongolian metallurgical coal last year, according to a statement from Peabody.
The venture has coal and uranium licenses in Mongolia and is exploring throughout the country.
Peabody has been seeking to increase its production of late. It was stymied in a recent growth effort as Australian mining company Macarthur Coal (MCC.AU) rejected its usd3.8 billion purchase offer.
Peabody shares were down 1.9percents at usd38.37 in recent trading amid a broad decline for coal stocks. The shares have gained 28percents over the past year.