Peabody Energy is cutting its production levels at the Burton coal mine on the back of falling commodity prices.
The company yesterday announced it was slashing production levels by approximately 1.5 million tonnes per year.
The contractor workforce will also be heavily cut as a result of reduced operations.
It is understood that up to three quarters of the staff on site, between 300 to 350 workers, will be cut from the operations.
According to a source close to the situation the mine is a high strip ratio operation, so this workforce and production reduction is essentially a significant step above, but in the same vein as, putting the operation in care and maintenance.
A Peabody Energy spokesperson clarified the move for Australian Mining, stating "this is definitely not care and maintenance, as we will still be removing around one million tonnes of coal per year".
“The Burton Mine is Peabody's highest unit-cost operation, and production levels are not sustainable in the current market environment; following negotiations with the contractor operator, production levels are expected to be reduced to approximately one million tons per year, as the operation targets lower-cost reserves using reduced fleets of equipment,” Peabody said in a company statement.
Contractor on site Thiess confirmed that "Peabody has requested that we review the current operations and mine plan, and work together to make operational changes, targeting lower cost coal reserves".
"Thiess is deeply mindful of the impact that these changes will have on our people and their families, and will keep them informed on the range of options available as we move forward," the contractor said in a statement.
On the back of this output reduction the miner has also reduced its average Australia cost per short ton to around $70.
It has also readjusted its third quarter EBITDA, raising the target by approximately US$10 million, while at the same time cutting Australian targeted coking coal sales for the year by one million tonnes to between 15 and 16 million short tons.
This has created a new overall Australian sales target of 34 to 36 million short tons.
These cutbacks are part of the company’s wider focus on cost cutting “which include increased productivity at the Metropolitan Mine following installation of a new longwall, improved performance at New South Wales thermal coal mines, ongoing owner-operator conversions, and sustained cost and productivity improvement programs across the platform,” Peabody stated.