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No let up as Peabody takes a beating

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World Coal,

Peabody Energy – one of the few large US coal miners to so far have avoided bankruptcy – has announced a US$1.86 billion loss from its continuous operations on the back of US$1.28 billion of asset writedowns.

The company, which has been hit by significantly lower coal demand from the US power sector and weak prices on the international market, recorded impairment charges of US$969.2 million on its Australian metallurgical coal assets and US$308.6 million on non-producing reserve and non-mining assets in the US.

The company’s liquidity totaled US$902.6 million on 9 February – down from US$2.85 billion at the end of December 2015 – in cash and through the company’s revolving credit facility, which was fully drawn down at the end of last year.

The company also said it has US$823.7 million in letters of credit.

Looking ahead, the company lowered its outlook for US utility demand for coal by 40 – 60 million short t on projected plant retirements and lower natural gas prices. Coupled with an expected reduction in utility stockpiles and lower exports, the company projects a 150 – 170 million short t fall in US coal shipments.

In Australia, Peabody is lowering its metallurgical coal production to reflect operational changes made in 2015. It is also planning to place the Burton mine into care and maintenance by the end of the year.

“Against a brutal industry backdrop, the Peabody team delivered a strong operating performance as we improved safety, achieved over US$620 million in lower costs, further reduced capital, streamlined the organization and advanced multiple work streams to address our portfolio and financial objects,” said Peabody CEO, Glenn Kellow.

“It is clear that more must be done,” Kellow continued. “We are taking further steps to confront the prolonged industry downturn by targeting additional cost reductions, advancing non-core asset sales and pursuing aggressive actions to preserve liquidity and delever our balance sheet.”

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