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Peabody's Burton mine may not survive beyond 2016

PEABODY Energy's troubled Burton coal mine in Queensland's Bowen Basin is dragging down operating...

Lou Caruana
Peabody's Burton mine may not survive beyond 2016

The company, which has already cut operating costs by 28%% from its Australian operations in the June quarter, last week announced another 300 retrenchments.

“Probably going back in time, I think you can see that Burton has been a focus area for us,” Kellow said in a conference call with analysts quoted by Seeking Alpha.

“We talked some time ago about restructuring that contract to be able to work through lower volumes at Burton. And as we flagged, it's certainly a mine that is under increased scrutiny as we look to right about the middle of next year, whether it be important milestones about whether we continue with that activity or not.”

Peabody Energy chief financial officer Amy Schwetz confirmed that Burton remained an underperforming asset in its suite of Australian coal mines.

“We also expect to make additional improvements to the [Australian] platform,” she said.

“During the quarter, the Burton mine added several dollars per tonne of costs to our metallurgical segment and we will evaluate the loss-making Burton mine life beyond the middle of 2016.”

Metallurgical coal volumes declined by 17% mainly due to the planned reduction at the contractor-operated Burton mine and the end-of-life closure of the Eaglefield Mine in late 2014.

Australian adjusted EBITDA rose by more than $US50 million to $56 million as lower costs more than offset a reduction in volume and a $90 million price impact.

“Australian costs per tonne declined by over $20 to $52 per tonne with the majority of the benefit from lower currency and fuel prices,” Schwetz said.

“This performance offers a solid demonstration of how Peabody benefits from our Australian platform, apart from the effects of currency hedges.”

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