WDS in $5.3M dispute with Peabody over Metropolitan

WDS is seeking mediation with Peabody Energy over its decision to terminate a $5.3 million contract with the underground contractor at the American giant’s Metropolitan colliery in New South Wales.

Lou Caruana

WDS yesterday announced it was in a dispute resolution process with Peabody in relation to contracted work and amounts paid under the contract at Metropolitan.

The contractor previously advised that Peabody had suspended operations at the site in its business update on March 23.

“Peabody has sought to terminate its contract,” WDS said in a statement.

“WDS disputes the validity of the termination, has affirmed the contract and will be defending the claims made by Peabody Energy.

“WDS expected to undertake work on this project to a value of $5.3 million before the end of the financial year.”

Peabody did not get back to ILN regarding the dispute in time for publication.

The scope of WDS contract work at Metropolitan includes gate road development comprising 7.5km of driveage; supply of management, operators and equipment; coal driveage and primary roof support; panel and belt moves; and secondary support, ventilation, roadworks, services and excavations.

WDS mining division margins for the second half of 2011 were 3.6% lower than the previous corresponding period and a failure to resolve the dispute with Peabody could have a serious impact on its second half results for the 2012 financial year.

Earnings for the first half were $11.3 million from revenues of $98.7 million.

The company had an order book of $130.2 million as of February 22 and labour contracts with North Goonyella and Broadmeadow and secondary support contracts with Tahmoor.

In Peabody’s quarterly results announcement last week, the company said its strategy was to increasingly use its own labour and phase out contractors at some of its mines.

Peabody is expanding its Millennium, Burton and Metropolitan metallurgical coal mines, which are expected to contribute an additional 3-4 million tons at full production.

It is continuing to convert its Wilpinjong and Millennium mines from contract mining to owner operations.

Peabody’s March quarter revenues in Australia climbed 48% on higher realised pricing for both metallurgical and thermal coal and an 18% increase in sales volumes.

Australia shipments totalled 6.6Mt, including 2.9Mt of metallurgical coal and 2.6Mt of seaborne thermal coal.

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