Peabody weighs up North Goonyella sale

North Goonyella. Image: Peabody Energy.

Peabody Energy is considering selling the North Goonyella coal mine in Queensland following a move to cut jobs and activities at the site last year.

The United States coal major has commenced a commercial process for North Goonyella after receiving “substantial expressions of interest” in the asset.

Commercial outcomes could include a strategic financial partner, joint venture structure or complete sale of North Goonyella, according to Peabody.

The company has also written off $US58.5 million ($86.68 million) at the site, largely related to panel development after an underground fire hit in September 2018, leading to the site’s closure.

Peabody has reduced its fourth quarter North Goonyella costs to $US16.9 million following job cuts in late October last year.

“At this time, Peabody is in discussions with the Queensland Mines Inspectorate (QMI) regarding ventilation and re-entry of Zone B,” the company stated.

“Based on the success of discussions with QMI and/or progression of the commercial process being launched, Peabody will determine the appropriate level, if any, and timing of capital expenditures.”

Peabody Energy has suffered through a net loss of $US289.8 million in the December quarter, a contrast to the company’s buoyant position with $US252.6 million in net income in the prior corresponding period.

The company also generated a revenue of $US1.12 billion during the period compared with $US1.4 billion in the prior year.

“During the fourth quarter, Peabody made a number of operational improvements in Australia, reduced costs in four of five operating segments, opportunistically repurchased bonds to reduce debt, generated substantial cash from commercial settlements and progressed the regulatory process for the proposed Powder River Basin/Colorado joint venture,” Peabody chief executive Glenn Kellow said.

“For 2020, we are targeting improved met coal volumes and costs, lower selling, general and administrative (SG&A) and reduced North Goonyella holding costs.”

Peabody projected the new year to be challenging, noting the mild Northern winter, low natural gas prices as well as trade and import policy uncertainties.

The company expects its seaborne metallurgical volumes to be around 7.53 million tonnes for this year.

The release of the December quarterly results coincided with Peabody announcing plans to appoint new members to its board of directors, including equity partner and portfolio manager at Peabody’s largest shareholding company Elliott Management.

“We welcome this closer relationship with Elliott, which has been a substantial investor in Peabody’s capital structure for more than four years,” Kellow said.

“We are aligned in our objectives of maximising value creation and shareholder returns. We look forward to benefitting from the contributions of these new directors.”

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