<article><p class="lead">US coal producers Arch Coal and Peabody Energy today announced they will combine their Powder River basin (PRB) and Colorado assets into a joint venture.</p><p>Increased competition in thermal coal markets require companies to increase efficiency, drive down costs and reduce future capital requirements, said John Eaves, Arch's chief executive.</p><p>"It is hard to envision a better opportunity to achieve such reductions or better fit quite frankly than Arch and Peabody's western thermal coal assets," Eaves said. </p><p>The companies expect the joint venture to create an additional $820mn in pre-tax net value for the companies over the life of the mines and reduce costs by $120mn/yr. </p><p>The agreement will make mine planning more efficient, enhance blending capabilities, improve rail service and reduce long-term capital requirements, the companies said. They expect the lower cost structure of the joint venture will allow coal to better compete against other energy sources for power generations.</p><p>In the Powder River basin, the two companies will combine five mines — Peabody's Rawhide, Caballo and North Antelope Rochelle mines and Arch's Coal Creek and Black Thunder mines. The five mines produced a combined 42.4mn short tons (38.5mn metric tonnes) of coal in the first quarter, accounting for 60.3pc of total PRB production, according to US Mine Safety and Health Administration (MSHA) data.</p><p>The Black Thunder and North Antelope Rochelle mines, which share a border and are the two highest producing PRB mines, will be combined into a single complex once the joint venture is implemented. The two mines produced a combined 36.7mn st of coal in the first quarter, accounting for 52.2pc of total PRB production in that period, according to MSHA data. </p><p>Also included in the joint venture are two longwall mines in Colorado — Peabody's Foidel Creek mine (also know as Twentymile) and Arch's West Elk mine. The two mines produced a combined 2mn st of coal in the first quarter, accounting for 56.2pc of all coal produced in Colorado, according to MSHA data. </p><p>"The inclusion of the Colorado assets offers the ability to better serve domestic customers while preserving seaborne coal optionality," Peabody's chief executive Glenn Kellow said. </p><p>The seven mines sold a combined 206mn st of coal in 2018 and have total reserves of 3.4bn st. </p><p>The joint venture will be managed by a five-member board appointed by Arch and Peabody, with voting rights proportional to ownership. Economic shares were negotiated on the net present value of the mine plans.</p><p>Peabody will operate the mines and market the coal once the joint venture is complete.</p><p>The assets will operate independently until closing. Neither company gave a timeline for when the deal would be completed. The joint venture is subject to regulatory approval.</p></article>
