Peabody sells Millennium asset
Despite the best result for their CQ mines in five years
Wednesday 01 November 2017
Peabody’s Australian coal mines continue to be the star performers in their portfolio, with their thermal operations delivering margins of 37% and their Australian business overall delivering the best results in five years.
“Australian earnings (EBITDA) increased $226.5 million to $240.9 million, the highest contribution in five years, on improved seaborne pricing,” Peabody said.
“Australian sales volumes totalled 8.7 million tons, including 3.5 million tons of metallurgical coal sold at an average price of $119.55 per ton and 3.3 million tons of export thermal coal sold at an average price of $69.31 per ton, with the remainder delivered under domestic contracts.
“As a result of both strong operational performance and increased volumes, metallurgical costs per ton declined significantly to $78.42 per ton compared to $109.07 per ton in the second quarter of 2017.”
Despite some strong production results, the primary driver of the results was the recovery in coal prices which led to a 60% increase in revenues per ton for their metallurgical coal.
“Seaborne thermal coal demand and pricing continue to be supported by robust Asian demand primarily in China and South Korea,” they said.
“While import demand from India has been sluggish on increased domestic coal usage, stockpiles are currently at multi-year lows, which is supportive of additional imports in the fourth quarter.”
Looking to the future, Peabody is predicting demand for both thermal and coking coal to increase between 10 and 15 million tonnes this year.
Despite the stronger outlook, Peabody continues to offload Australian assets, in an attempt to get their balance sheet in order after going into administration in 2016 at the height of the downturn.
This quarter they announced they had sold 50% of the Millennium mine Coal Handling and Preparation Plant to BHP Mitsui coal who jointly use the facility for their Poitrel mine under the “Red Mountain” joint venture.
This follows Peabody’s sale of the mothballed Burton Coal mine North of Nebo to the Newhope Group controlled Lenton Joint Venture for around $14 million in September.
The Burton mine was entered into care and maintenance late in 2016.
In 2016 the US-based Peabody went into administration after reporting total losses of around $A2.6 billion in 2015 due to historically low coal prices.
Since that time it has managed to renegotiate a plan with its lenders, that's seen the company return to normal operations. However, it has been forced to sell around $5 billion in assets over that time.