Peabody takes earnings hit due to Australian coal mine problems

Peabody Energy (NYSE: BTU), the largest U.S. coal producer, announced Dec. 19 that full year 2013 Adjusted EBITDA is expected to be $60m to $80m lower than original targets due to delays in final commissioning of the new longwall top coal caving system at the North Goonyella Mine, along with the impact of the now-resolved labor action at the Metropolitan Mine.

Both of those mines are in Australia, where Peabody is a significant though not dominant producer as it is in the U.S.

While both issues were contemplated when targets were established in October, North Goonyella experienced a number of startup challenges related to hydraulic, mechanical and electrical equipment, which have extended the commissioning well beyond original expectations. All system equipment manufacturers are onsite as the mine teams work through final commissioning phases. At Metropolitan, work stoppages extended into November until a new labor agreement was signed, and the mine has now fully resumed operations. 

“While these items will affect our current results, our initiatives support our strategy of productivity improvements and cost containment and will better position the company going forward,” said Peabody Energy Chairman and CEO Gregory Boyce. “Our longwall top coal caving system is expected to drive increased recovery and productivity at our highest-quality metallurgical coal mine. And we believe our new labor agreement at our Metropolitan Mine reflects the lower inflationary environment increasingly evident across our Australia operations.”

As previously announced, prior full-year 2013 Adjusted EBITDA targets exclude any effects from the Peabody settlement agreement with Patriot Coal and the United Mine Workers of America. Patriot, which just emerged from a year-and-half of bankruptcy on Dec. 18, was spun off from Peabody in 2007. These effects will include charges to both continuing operations and discontinued operations, as outlined in the company’s filed documents.

Peabody Energy is the world’s largest private-sector coal company and a global leader in sustainable mining and clean coal solutions.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.