The company said the combination of a rising Australian dollar, historically low coal prices and increasing workers compensation insurance premiums had clinched the decision. Employee numbers will also be reduced as a result.

“Thermal coal prices remain historically low,” said Peter Coates, chief executive Xstrata Coal. “This has been further exacerbated by the strengthening of the Australian dollar, which has seen the price received in Australian dollar terms fall by 30% in the last eighteen months.”

Coates added that New South Wales coal producers are facing high increases in workers compensation insurance premiums, which continue to rise despite safety improvements. During the last 12 month period, workers compensation insurance premiums at the mine have increased by 37%, exceeding royalties paid on a per tonne basis.

Baal Bone, in the Western Coalfield, produces a medium-ash coal product and higher transportation costs than other Hunter Valley producers, due to its distance from port. All of these factors have impacted on the mine’s viability.

Mick Buffier, chief operating officer of Xstrata Coal NSW, said, “In short, unless we cut production, Baal Bone will not be able to remain cash positive going forward. Today’s announcement sadly has consequences for our workforce, with employee levels to fall in line with production from 150 to 92 people. We have an excellent team at Baal Bone, all of whom have worked extremely hard to keep the operation viable.

“However, they have been up against factors beyond their control, which makes this decision all the more disappointing.”