Peabody axes 450 contractor positions

THE HORROR week in the Australian coal industry continues – with Peabody Energy announcing it will axe 450 contractor positions from its operations.
Peabody axes 450 contractor positions Peabody axes 450 contractor positions Peabody axes 450 contractor positions Peabody axes 450 contractor positions Peabody axes 450 contractor positions

Peabody's Wambo North Underground in Australia

Lou Caruana

The announcement comes after the Aquila Resources-Vale joint venture Eagle Downs project in Queensland announced job cuts, as did Glencore Xstrata’s Ravensworth mine in New South Wales.

A spokeswoman for Peabody Energy confirmed to ILN that the reductions were a response to market conditions and ongoing actions to reduce costs.

“Peabody Energy regrets the impact on the contractors directly affected and is conscious of the likely impacts on communities in which we operate,” she said. “We are taking these steps to secure the long-term competitiveness of our operations.”

Peabody chairman and chief executive Gregory Boyce has signalled that the company would be relying less on contractors for its operations and replacing them with its own employees despite the short-term rise in unit costs of production that this would entail.

For the period ended March 31, Peabody reported revenues of $US1.75 billion, a 14% drop from $2.02 billion it tied to weak coal prices in the US and Australia.

Australian revenues, meanwhile, totalled $738 million versus $854.1 million in the prior year quarter, due primarily to a 32% decline in realised pricing per tonne that was offset in part by a 26% rise in shipments.

Australian sales were 8.3Mt, including 3.6Mt metallurgical and 2.7Mt of seaborne thermal coal.

Peabody is targeting total 2013 Australian sales of 33-36Mt.

The company is eyeing a US dollar cost per ton 2-3% lower than 2012 and Australian costs of approximately $80/t as cost containments and productivity improvements in part serve to mitigate its external spending pressures and a higher-cost metallurgical coal mix.

The transition to owner-operator status at Peabody’s Millenium and Wilpinjong mines is contributing to a 10% increase in unit costs for the coal giant in Australia.

Wilpinjong, an open cut mine 40km northeast of Mudgee, produces high-quality thermal coal for export and domestic markets.

Peabody purchased Wilpinjong in 2006 and now has a workforce of about 320, including contractors. It is mined under contract by Thiess and will transition to Peabody owner-operator status in the lead up to March 31.

With an average strip ratio of 2:1 for the life of the mine, Wilpinjong is one of the lowest-cost coal mining operations in Australia.

Wilpinjong produced 8.9 million tonnes of saleable coal in 2011.

The open cut Millennium mine, 160km southwest of Mackay in Queensland, produces coking and low to mid-volatile pulverised coal-injection coal for export markets.

Operations began in 2006 and it now has a workforce of about 300 people, including contractors. It was mined under contract by Downer EDI Mining.

The Millennium Expansion Project (MEP) will see the existing mining operation grow into two new lease areas. It will see an increase of the mine’s run-of-mine extraction rate up to 5.5Mtpa.

In 2011, Millennium produced 1.7Mt of saleable coal and is working to ramp up to 3Mtpa.

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