Pe­abody is gen­er­at­ing strong re­turns on the back of con­tin­ued strength in seaborne met­al­lur­gi­cal and thermal coal fun­da­men­tals – with the global miner’s Aus­tralian as­sets do­ing much of the heavy lift­ing.

The Australian Mining Review - - PEABODY ENERGY - STAFF WRITER

PE­ABODY con­tin­ues to lean heav­ily on the out­stand­ing per­for­mance of its nine Aus­tralian thermal and met­al­lur­gi­cal mines to drive the global miner’s re­vival, as the US coal sec­tor re­mains chal­lenged.

Over­all rev­enues for the sec­ond quar­ter in­creased 4 per cent over the prior year to $US1.31 bil­lion; driven by a 20 per­cent bump in Pe­abody’s Aus­tralian met­al­lur­gi­cal and thermal sales vol­umes, which more than off­set lower US vol­umes.

The rise of nat­u­ral gas and wind gen­er­a­tion in the US are chal­leng­ing do­mes­tic thermal coal con­sump­tion, while power plant re­tire­ments also weigh on de­mand.

But seaborne thermal de­mand re­mains “vig­or­ous”, ac­cord­ing to Pe­abody, with New­cas­tle spot pric­ing reach­ing highs of ap­prox­i­mately $US116 per tonne in the sec­ond quar­ter.

Chi­nese thermal coal im­ports jumped 20 per cent, or 19 mil­lion tonnes, through June com­pared to the prior year on sturdy in­dus­trial ac­tiv­ity and an 8 per cent in­crease in thermal power gen­er­a­tion, driven by favourable weather con­di­tions.

Pe­abody stated that its Aus­tralian ex­ports re­bounded from the prior year ef­fects of Cy­clone Deb­bie, in­creas­ing by an es­ti­mated 7 mil­lion tonnes through May com­pared to the prior year.

Sec­ond quar­ter 2018 seaborne hard met­al­lur­gi­cal coal spot pric­ing also re­mained strong, fetch­ing an av­er­age price of $190/t.

And while the Aur­i­zon rail and labour is­sues in QLD re­mained in the me­dia spot­light, Pe­abody said it “has yet to be im­pacted by de­lays in rail ser­vices and con­tin­ues to closely mon­i­tor the sit­u­a­tion”.

Aus­tralia: Driv­ing Growth

Pe­abody’s Aus­tralian op­er­a­tions con­tin­ued to pro­duce sig­nif­i­cant re­sults, with to­tal Ad­justed EBITDA of $US266.1 mil­lion for the quar­ter – a $US88.3 mil­lion in­crease over the prior year, boosted by 45 per cent growth in met­al­lur­gi­cal vol­umes and fur­ther strength­en­ing in seaborne thermal pric­ing.

“Aus­tralian thermal led the com­pany in ad­justed EBITDA mar­gins of 40 per cent, as higher vol­umes and el­e­vated pric­ing mit­i­gated the ef­fects of higher costs as­so­ci­ated with tem­po­rar­ily in­creased over­bur­den ra­tios at the Wilpin­jong Mine,” the com­pany stated in its Q2 re­port.

“The Aus­tralian met­al­lur­gi­cal coal seg­ment con­tin­ued to lead the com­pany in rev­enues of $417.5 mil­lion, an in­crease of 45 per­cent com­pared to the prior year, largely due to sus­tained de­mand for qual­ity met­al­lur­gi­cal coal and healthy seaborne pric­ing lev­els.”

Af­ter an ex­tended long­wall move at the Metropoli­tan mine in the sec­ond quar­ter of 2017, costs per tonne de­clined by $US19.70/t to $89.37/t in Q2 2018, com­pared with the prior cor­re­spond­ing quar­ter.

“As ex­pected, sec­ond quar­ter costs im­proved rel­a­tive to the first quar­ter of 2018 and are ex­pected to be within the com­pany’s an­nual guid­ance range for the year,” the com­pany stated.

“The Aus­tralian met­al­lur­gi­cal seg­ment once again led the com­pany in ad­justed EBITDA con­tri­bu­tions of $US158.5 mil­lion, as ad­justed EBITDA mar­gins in­creased to 38 per cent.”

Ex­ten­sions & Up­grades

In 2017, Pe­abody was granted con­sent for the ex­pan­sion of its Wilpin­jong op­er­a­tions un­til 2033.

In June this year, a NSW court rat­i­fied this favourable de­ci­sion re­gard­ing Pe­abody’s large Wilpin­jong mine ex­ten­sion plans, clear­ing the last hur­dle to al­low it to move for­ward.

Then in July, Pe­abody con­firmed the ex­ten­sion of its North Goonyella met­al­lur­gi­cal coal mine, near Mo­ran­bah in Cen­tral QLD.

With an es­ti­mated 71mt re­source across the mine, the North Goonyella South project will ex­tend mine life at least un­til 2026.

To sup­port the ex­ten­sion, Pe­abody Pres­i­dent – Aus­tralia Ge­orge J. Schuller Jr said the com­pany was in­vest­ing in a new long­wall sys­tem, fea­tur­ing a 300m face con­veyor and ad­vanced long­wall tech­nol­ogy in­clud­ing au­to­mated steer­ing and the re­quire­ment for less main­te­nance.

“Not only does that im­prove safety for our op­er­a­tors, it en­ables faster haulage speeds of our high qual­ity re­serves,” Mr Schuller said.

The mine ex­ten­sion will also se­cure em­ploy­ment for more than 230 em­ploy­ees.

“We are ex­tremely pleased to be able to con­tinue to pro­vide em­ploy­ment for peo­ple in re­gional and re­mote lo­ca­tions.

“Any op­por­tu­nity we have to sup­port the lo­cal com­mu­nity through jobs and in­vest­ment is a win for us, and we cer­tainly feel we will be able to do this at our North Goonyella coal mine for many years to come.”

Rel­a­tive to the sec­ond quar­ter, Pe­abody ex­pects the long­wall move at North Goonyella to im­pact third quar­ter met­al­lur­gi­cal seg­ment ad­justed EBITDA mar­gins by about $US15/t.

The North Goonyella long­wall move has com­menced and is ex­pected to be com­pleted in the cur­rent quar­ter.


North Goonyella met­al­lur­gi­cal coal mine.

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