Peabody will consider closing mines as low prices continue

Peabody has announced its results for Q1 2014, admitting it is reviewing operations at some of its higher-cost mines in light of continued softness in global coal prices. “We are having some pretty serious looks at a couple of operations,” the company said on a conference call in response to a question on whether the company would consider closing some of its mines.

Overall, the company reported Q1 loss of US$ 44.3 million compared to US$ 10.3 in same period last year – substantially higher than expected. In the US, an 8% increase in volumes was offset by a 7% decline in revenue per short ton, while Australian total volumes remained in line with the previous year but revenue suffered from a higher proportion of thermal coal in the sales mix and the challenging pricing environment. Metallurgical coal volumes are expected to improve through the year with the ramp up of production at the company’s North Goonyella, where the installation of a new top coal caving longwall system has taken longer than expected.

The company also warned the Q2 losses would be likely to be higher than expected due to continued weak prices, a longwall move and lower expected tax benefit. "The guidance for a significant step down seems reasonable considering the significantly lower benchmark met and thermal prices that will be realised in the quarter," Simmons & Co analysts wrote in a note to clients.

Written by Jonathan Rowland

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