Sedgman steps up Peabody contract by $45m

MID-SIZED engineering services provider Sedgman last week announced it had secured a $A45 million contract with the world’s largest private sector coal mining company.
Sedgman steps up Peabody contract by $45m Sedgman steps up Peabody contract by $45m Sedgman steps up Peabody contract by $45m Sedgman steps up Peabody contract by $45m Sedgman steps up Peabody contract by $45m

Courtesy of Sedgman.

Staff Reporter

Brisbane-based Sedgman said on Thursday that it had secured the work with Peabody Energy at the miner’s Millennium Mine, which is located near the town of Moranbah in Queensland’s Bowen Basin.

The deal will see Sedgman take on a two-year contract to oversee the operation of the coal handling and preparation plant (CHPP) at Millennium. The contract is set to begin this month and includes a one-year extension option in addition to the initial two-year, $45 million contract.

Sedgman chief financial officer Alan Wigan said this extension would be a proportional addition to the initial value of the two-year contract, adding $22.5 million.

Millennium’s CHPP was originally built by a competitor of Sedgman’s, when the mine was owned by Excel Coal. The plant was not finished and the original contractor has since gone into administration.

When Peabody took over the mine from Excel, Sedgman was initially engaged to make the plant operational and get production to 1000 tonnes per hour. Now it will continue to operate the plant.

“What came to us was a plant in need of repair,” Wigan said.

“It was a bit of a challenge for us. It’s the only plant that we operate that we did not construct but it’s been well worthwhile for us.

“What we said to them was ‘Guys, you’re going to have to spend a bit more money on this plant.’ So we walked them through that and they were very keen just to have the thing operational.”

Wigan said Sedgman’s profit forecast for the full 2008 fiscal year was expected to be 15–20% up on the 2007 results.

He said this was largely due to the level of activity in the marketplace, and Sedgman’s position as a leader in the area of CHPPs.

Sedgman’s new managing director and chief executive, Mark Read, started work with the company yesterday, replacing Peter Hay, who retired on Friday.

Read is a former general manager of Sinclair Knight Merz’s Mining and Metals business unit, and has signed a five-year contract with Sedgman. Hay will continue on the board of Sedgman as a non-executive director.

Hay said last week the signing of the Millennium contract would mean Sedgman now has contracts for the management of six CHPPs in the Bowen Basin area.

“With a forecast for record profits in fiscal 2008, we are expecting another strong year ahead as we expand into markets with huge potential for long-term growth, including Africa, China and South America, on top of the booming Australian coal and metals sectors,” he said.

The actual opencut mining operation at Millennium is operated under contract by Downer EDI Mining using conventional truck and excavator mining methods.

The Millennium mine is adjacent to BHP Mitsui Coal's Poitrel project, and as such Peabody and BHP Mitsui Coal have agreed – through the Red Mountain Joint Venture – to share coal infrastructure with a total annual capacity of 6 million tonnes.

Millennium also has other strategic advantages. Located south of the Burton and North Goonyella mines, it offers Peabody the opportunity for operational synergy in the north Bowen Basin. Peabody acquired 84.6% of Millennium in October 2006.

On May 2, Sedgman announced that it had invested in clean coal technology company Exergen, which has developed a novel process for removing moisture and contaminants from brown coal.

The process is called Continuous Hydrothermal Dewatering (CHTD), and following successful trials at a pilot facility in Beaconsfield, Tasmania, it promises emission reductions of approximately 40% over regular coal when combined with new-technology power generation plants.

Tata Power, a subsidiary of the Indian Tata group of companies, has also invested in Exergen.

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