The production target is at the low end of the original range of 230-240Mt, and reflects 4-5Mt of lower third-quarter shipments. The company expects record 2006 coal sales of 250-260Mt.

Peabody is facing several issues this year, including the new longwall system that was installed at Colorado’s Twentymile mine in May, which according to Peabody “has failed to operate consistently due to manufacturer’s issues”.

“Management and mine personnel are working with the manufacturer to resolve the issues, and Peabody has taken the unusual step of ordering a new shearer from an alternate supplier as a precaution.

“Peabody is also monitoring the new longwall equipment at the North Goonyella Mine in Queensland, Australia.”

While Peabody's Powder River Basin operations will set shipment records in 2006, the mines continue to receive fewer trains than needed to meet sales commitments.

Peabody is accelerating mine transportation capacity to match the rail expansion by the major carriers.

Peabody also said a third-party coal supplier in Appalachia had abruptly ended operations due to the mine's high cost structure.

The supplier was expected to produce coal through the first half of 2007, and the early closure will reduce production by nearly 240,000 tons of metallurgical coal for the second half of 2006.

Peabody is accelerating the ramp-up of the 2Mtpa Black Stallion Mine to partly offset the impact in 2007.

“Peabody's management is keenly focused on solving these near-term supplier and transportation issues," Peabody chief Gregory H Boyce said.

“Overall, Peabody is performing very well. Long-term industry fundamentals are strengthening, and we look forward to record performance for 2006, 2007 and beyond."