Peabody spins off Patriot Coal

PEABODY Energy has announced it will package its Kentucky and West Virginia coal mining operations into a separate public company called Patriot Coal – in line with its strategy to focus on areas such as Asia, Australia and the western United States.

Staff Reporter

Patriot is already a wholly owned subsidiary of Peabody and sold 24.3 million tons of coal in 2006, with 1.4 billion tons of proven and probable coal reserves for use in existing and future operations.

The spin-off will distribute Patriot’s common shares to Peabody’s stockholders, with each holder receiving a dividend of one share of Patriot common stock for every 10 shares of Peabody common stock held.

In a Securities and Exchange Commission filing, Peabody pointed to the increasingly difficult geological conditions in Appalachia, where underground operations are mining thinner coal seams than in the past.

“These geological factors, coupled with increased costs of labour, materials and supplies, capital equipment and compliance with safety and environmental regulations, have led to a major rise in production costs for many eastern US producers,” Peabody said.

Following the spin-off, Patriot’s assets and business will consist of coal operations and reserves in Central Appalachia, Northern Appalachia and the Illinois Basin.

Patriot mining operations and coal reserves include:

  • Appalachia – In southern West Virginia, Patriot has three company-operated mines, two joint venture mines and numerous contractor-operated mines, serviced by four coal preparation plants. These operations and related infrastructure are located in Boone and Kanawha counties. In northern West Virginia, it has one company-operated mine, serviced by a preparation plant and related infrastructure. These operations are located in Monongalia County.
  • Illinois Basin – In the Illinois Basin, Patriot has four company-operated mines, serviced by three preparation plants. These operations and related infrastructure are located in Union and Henderson counties in western Kentucky.