Peabody gives up on Goonyella 10 North Panel

PEABODY Energy will not attempt to access the 10 North Panel through existing mine workings at its North Goonyella mine in Queensland due to the time cost and required regulatory approach to ventilate and re-enter the rest of the mine after an underground fire last September.
Peabody gives up on Goonyella 10 North Panel   Peabody gives up on Goonyella 10 North Panel   Peabody gives up on Goonyella 10 North Panel   Peabody gives up on Goonyella 10 North Panel   Peabody gives up on Goonyella 10 North Panel

The fire at North Goonyella last September has caused Peabody to mothball its plans for production from the flagship mine.

The company now expects to incur a total of US$12 million to $15 million to ventilate Zone B over a multi-month period.

Based on the planned approach, the company expects no meaningful North Goonyella volumes for three or more years, with development coal to be produced in the second half of 2020.

Assuming successful ventilation and re-entry of Zone B, Peabody estimates 2020 project capital costs of approximately $50 million to $75 million beginning in the second half of the year with development of 6 South.

"The company will continue to refine capital and cost estimates as work progresses through Zone B," it said.

"No incremental capital will be committed until Zone B has been explored. Peabody would mitigate cash outlays by selling development tons into the market."

Instead, the company has identified a preferred path to create value from the substantial North Goonyella reserve base by mining the southern panels, beginning with the 6 South panel.

Peabody's preferred path would include ventilation of Zone B in the current mine configuration, with an approach of utilising bore holes from the surface.

Incremental spending for ventilation is contingent on obtaining pre-approval for from the Queensland Mine Inspectorate, and that process is underway.

Following planned ventilation, the company intends to re-enter Zone B and assess conditions with a target of developing the southern panels that contain about 20 million short tons of high-quality, hard coking coal.

"The company has completed most of the essential work in Zone A," Peabody said.

"All steps taken to date have been necessary and beneficial to preserve access to an additional 65Mst of hard coking coal in the lower seam in a lower-cost manner than otherwise would be required. Development of that longer-term project is in the pre-feasibility stage.

"The expected length of time to ventilate Zone B necessitates a different approach that significantly reduces the labour required and lowers planned holding costs.

"Peabody is taking steps to reduce most of the salaried and hourly workforce due to the lack of beneficial work and intends to offer alternative employment to workers where practical to mitigate the impacts of the reductions."

The company is reducing its quarterly run-rate cost estimates for 2020 to about half that of recent levels.

Steps are being taken to market take-or-pay commitments as well as preparation plant and loadout infrastructure, which could further reduce quarterly costs.

A highwall failure in late June at the Middlemount mine in Queensland contributed to Peabody making a loss from continuing operations of $74.3 million in the September quarter.

Third quarter adjusted earnings totalled $150.3 million versus $372.1 million in the prior year, reflecting the effects of pricing, shipments and lower Middlemount earnings.

Seaborne thermal costs per short ton of $35.33 reflect strong performance from the Wambo underground mine following a longwall move in the second quarter and are anchored by the low-cost Wilpinjong mine.    

Seaborne metallurgical costs totalled $113.63/st, excluding North Goonyella project costs, and reflected lower volumes, elevated overburden ratios at the Coppabella mine, and an extended longwall move at the Metropolitan mine.

The company said it is improving equipment utilisation and mining methodology at the Coppabella mine given an elevation in overburden ratios consistent with the mine plan.