MELBOURNE (Reuters) -Peabody Energy is set to reveal on August 19 whether it will continue with its $3.78 billion bid for Anglo American's Australian coking coal mines, as time ticks down for it to renegotiate a lower price for the deal.
The U.S. miner last year agreed to buy the mines in Queensland's Bowen Basin, the world's top coking coal region, as part of its move into becoming a coking coal producer.
But in March, the Moranbah North mine was closed due to high gas levels, leading Peabody to trigger
a clause that allows a party to break or renegotiate a deal if a significant negative event occurs between signing and completion. In this case, it gave a 90 day consultation process which expired on August 3.
Since it has not reached a revised agreement with the seller, Peabody intends to provide an update on August 19, it said at its results.
"We believe a last minute deal has become less likely, and our base case now is that this goes to arbitration," Jefferies said in a note on Monday. The broker estimates a $316 million value hit if the Moranbah North mine is able to be ramped back to full capacity within three months from Sept 1.
Anglo says the event does not qualify as significant since damages and downtime are likely to be limited and CEO Duncan Wanblad has said next steps were up to Peabody.
Part of the standoff is because it is unclear when the mine will be able to restart while the state regulator assesses its safety. The regulator did not provide a timeline when contacted by Reuters but said the mine was undergoing a "staged approach" to reentry as it prioritised worker safety.
For Anglo, any arbitration would push back its restructure, and may raise concerns around mine management and choice of buyer.
Strong interest from previous bidders is expected and Anglo is prepared to rerun the process, a source familiar with the matter told Reuters. Anglo did not immediately reply to a request for comment.
For Peabody, ending the deal would ease the pressure of looming repayments to a $2 billion dollar bridge loan due from late November. Peabody posted a second quarter loss as coal prices fell by a third from a year earlier. Peabody and Anglo did not immediately comment outside office hours.
(Reporting by Melanie Burton in Melbourne; Additional reporting by Scott Murdoch in Sydney; Editing by Michael Perry)
