BTU Weighs Legal Options at Moranbah North

Anglo Faces Mounting Regulatory Challenges to Restart Operations

Peabody Energy’s BTU 0.00%↑ recent invocation of a Material Adverse Change (MAC) clause in its agreement to acquire the Moranbah North mine from Anglo American has put a spotlight on serious underground access issues and the uncertain future of one of Queensland’s most technically complex coking coal operations.

The dispute follows an extended shutdown at Moranbah North, where elevated gas levels—possibly from a spontaneous combustion event—have prevented Anglo from accessing underground workings since early April. As of early May, regulators and mine inspectors remain unable to confirm when operations can resume.

A confidential advisory from Queensland’s mine inspectorate, reviewed by The Coal Trader, highlights the severity of the situation. The lead inspector advised that the safest course would be to remotely seal longwall 113 and fully inertise the goaf, citing persistent ignition risks and limited confidence in the effectiveness of the current strategy.

“The current strategy still has residual risk of either undetected spontaneous combustion or other unknown ignition source,” the inspector wrote. “My advice to the SSE (Senior Site Executive) is to consider remote sealing LW113 and fully inertise.”

Such a step would effectively write off a portion of the mine’s production for a prolonged period—something any acquirer would need to reassess. While MAC clauses are often controversial, legal expert Robert Milbourne told analysts on a call last week that invoking one in this case may not be without merit, depending on the technical facts.

“To trigger a MAC under UK law, you need something unforeseeable with a long-term adverse effect,” he said. “A full-year shutdown with no underground access could certainly meet that threshold.”

Technical opinions from non-affiliated engineers we have consulted seem to vary on potential length of outage. If the longwall panel does indeed require sealing, another 2-3 months minimum outage seems to be consensus. That would come extremely close to the August deadline for deal closing - whether we use the 90-day clock started by Peabody or the 9-month timeline stated in the purchase agreement.

Furthermore, opinions vary on the salvageability of the longwall itself. If the ignition was in the goaf (for any laypersons, that means the mined-out area in an underground mine) then it may be possible to salvage the equipment and refurbish/redeploy at a later time. If that is not possible, then a new longwall must be ordered, which would take at least 12 months to acquire, and certainly meet Mr. Milbourne’s stated standards for triggering a MAC.

We should emphasize once again here that the Moranbah North deal is governed by UK law, which offers a well-developed framework for resolving MAC disputes. Anglo, headquartered in London, is understood to have opted for UK jurisdiction in the contract. Milbourne pointed to the 2021 Mirabella Nickel case, where a buyer attempted to exit a $1 billion deal under similar terms. The UK High Court ruled in favor of the seller, awarding damages now estimated at up to $500 million.

While Peabody’s move has sparked debate, Milbourne suggested it could also reflect an effort to renegotiate terms rather than terminate outright. “If the technical problems are serious and long-lasting, invoking a MAC could be a legitimate contractual step. But if the mine restarts soon and BTU can’t prove materiality, the legal risk is high,” he said.

Analysts following the deal expect developments from Anglo to be made public within weeks, not months. As Milbourne noted, “If access isn’t restored soon, the conversation shifts from legal interpretation to valuation—and it’s reasonable for a buyer to seek clarity before proceeding.” But should this proceed to the legal route, a resolution could take 2-3 years to materialize.

As we stated in our last BTU/Anglo piece, if the mine comes back online soon - no harm, no foul, and the deal is completed. If a new longwall is needed, that’s $250-300M off the top, plus another $250-300M in lost EBITDA as the company endures the 12 month wait time for new equipment. And if the mine is closed indefinitely, well, to quote a pal of mine, “if that’s not a MAC then I don’t know what is.”

-MW