Global producer values its Australian assets

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 07 Oct 2013   Posted by admin


AS one of the oldest and largest private sector coal companies in the world, Peabody Energy has experienced it all; from world wars and depressions to global financial crises.
The US company has come a long way since the 1880s, when Francis S. Peabody used his cart and two mules to deliver coal from established mines to homes and small businesses throughout Chicago.
With 9 billion tonnes of proven and probable coal reserves, Peabody has a considerable global presence servicing 30 countries across six continents.
In 2012 alone, the company sold 248.5 million tonnes of coal to electricity and industrial plants worldwide.
Despite a $430 million loss from reduced pricing, Peabody was able to increase its Australian sales volumes by 30 per cent to a record 30mt in 2012, with metallurgical coalsales improving by 50 per cent to 14.1mt.
Peabody’s Australian operations export to steel producers in Japan, Europe, Taiwan, India and South America.
Queensland
Peabody has long recognised the value of Australian coal, opening its first overseas mine in Queensland in 1965.
The state is home to seven of the company’s 11 coal projects: Burton, Coppabella, Eaglefield, Middlemount, Millennium, Moorvale and North Goonyella. Acquired by Peabody in 2004, Burton was one of the first projects to use the terrace mining technique for steep seams.
With a workforce of 900 people, the mine extracts medium-volatile bituminous hard and semi-hard coking and thermal coals. The coal is shipped through the Dalrymple Bay Coal Terminal near Mackay.
To extend the life of the mine, Peabody is looking to increase the depth of terrace mining to 230m, which has not been done before in Australia.
In 2012 the Burton mine produced nearly 1mt of saleable coal.
The Coppabella mine is 160km west of Mackay and produces pulverised coal injection (PCI) coal for export.
Peabody operates Coppabella using dragline and pre-strip methods, and has a 73 per cent interest in the mine, which employs about 550 people and produced 2.6mt in2012, making it one the fastest coal mine developments in the country.
In operation since 2003, the Eaglefield mine was purchased by Peabody in 2004 and shares its 3341 hectare lease with the only underground mine in Queensland – North Goonyella.
Eaglefield employs 220 people and has not had an accident for more than 41 months –  company record.
The mine produced 0.9mt of coal in 2012 and shares its Coal Handling and Preparation Plant (CHPP) and other infrastructure with North Goonyella.
As the only Queensland mine that is not open cut, the underground North Goonyella mine produces premium quality, high strength coking coal. It produced 2.6mt of coal in 2012 and employs about 500 people. Peabody is currently exploring the opportunity to generate electricity from the coal bed methane.
Mining started at the Middlemount mine in 2011 and is the first greenfield project development in the Bowen Basin since 2007. With a workforce of 400 people, the Millennium mine sold 3mt of coking and PCI coal in 2012.
Adjacent to BHP Mitsui Coal’s Poitrel project, Peabody agreed to share its infrastructure at the site – which has annual product capacity of 6 million metric tonnes. Peabody has a 73 per cent interest in the Moorvale mine, 156km southwest of Mackay.
The project is an excavator and strip operation and produced 1.9mt in 2012.
NSW
While not as heavily involved in NSW, Peabody still has three significant coal operations: the Metropolitan, Wambo and Wilpinjong mines. Right on the coast, 30km north of Wollongong, the Metropolitan underground mine produces coking coal and has been in operation for much of the last 125 years: making it nearly as old as Peabody.
The project employs 570 people, includingcontractors, and produced 2.1mt in 2012. In 2009, the mine underwent a $70 million expansion to increase future output. Metropolitan has 320 site workers and provides direct and indirect employment for nearly 3000 people.
The Wambo mine is a combined open cut and underground project that has operated in the Hunter Valley since 1969.
In 2012, the open cut and underground mines produced 3mt of coal and 3.5mt of coal respectively.
Wambo was acquired by Peabody in 2006 and produces thermal coal. High quality coal is produced at the Wilpinjong mine, in the western coalfields of NSW: 12.5mt was sold in 2012 with an average strip ratio of 2:1, making it one of the lowest cost mining operations in Australia.
Peabody has operated the project since its approval and first shipment in 2006.
Current climate
While Peabody is no stranger to global strife, the company had to adjust to the latest dip in the economic cycle.
Prices for thermal coal fell more than 30 per cent in the last couple of years to about US$80 per tonne while coking coal fell 40 per cent to US$130 per tonne.
Peabody shares have not fared well either, on track for a third straight year of decline. In the first half of 2013, the company undertook aggressive cost containment inAustralia and the US, which led to a 6 per cent reduction in outlay and the loss of 400 Australian jobs.
The job cuts included 170 permanent employees and 230 contractors – about 5.7 per cent of its Australian workforce.
CFMEU spokesman Steve Smyth said that short term cost cutting could hurt the company later on when the industry picks up.
“We’ll be back to where they are when they said they had a skill shortage,” he said. “They should be investing in employees for the long term. They brought them on-line at time when coal prices were very high. “None of these companies have lost contracts – it’s all about how much profit they can make.”
Queensland’s Resources Council chief executive Michael Roche said while the coal industry was going through a tough phase, it was still competitive.
“Since May last year, we estimate close to 8000 jobs have been lost to the Queensland coal industry,” he said.
“In the first six months of 2013, the industry grew their export numbers by 15 per cent on a year ago. “The industry is trying to grow, it is trying to boost production, but it has to do so with a lower cost structure.”
Mr Roche said there was some good news for the state as its diversity of resources ensured steady employment growth.
“Quarterly data from the Australian Bureau of Statistics shows that mining and resources sector full-time employment has remained steady over the past 12 months at around 73,000 people,” he said. “Coal employment is down but industries such as gas have been on the rise.” Peabody chairman Greg Boyce playeddown the costs cuts, saying that Australian price declines were partly offset by a 5 per cent volume increase with Australian sales totalling 8.6mt.
“The strength of Peabody’s global platform and the significant progress of our cost containment actions helped us overcome a number of challenges during the quarter,” he said.
“Our progress in reducing capital and moving our operations down the cost curve highlights the actions we are taking to succeed in all market conditions.
“Peabody continues to drive improvements  across our platform, which remains very well positioned with competitive assets in the growth regions of the United States and Australia.” Mr Boyce said Australian coal assets were looking increasingly attractive to major overseas companies, alongside the falling dollar.
“We’re starting to see Australia come back into the competitive range that it always held in terms of the global seaborne market,” he said.
“So I think Australia is still a place that you want to have quality assets, and that’s why we’re there. “We announced some additional reductions in Australia as our productivity numbers continues to improve.
“All of that is designed to have as many of our tier-one assets at the low end of the cost curve as we possibly can, and that’s always been the nature of how you succeeded in the commodities business,” Mr Boyce said.