Higher Wilpinjong costs eat into Peabody earnings

A SHARP increase in production costs at Peabody Energy’s Wilpinjong coal mine in New South Wales has taken the gloss off higher thermal coal prices in the September quarter.
Higher Wilpinjong costs eat into Peabody earnings Higher Wilpinjong costs eat into Peabody earnings Higher Wilpinjong costs eat into Peabody earnings Higher Wilpinjong costs eat into Peabody earnings Higher Wilpinjong costs eat into Peabody earnings

Peabody Energy's Wilpinjong mine in NSW.

Wilpinjong's costs of US$25.62 per short ton were 31% higher than the previous corresponding period due to higher equipment maintenance, fuel and royalty costs, unfavourable exchange rates, and completion of Wilpinjong extension boxcut development. 

In the third quarter, Wilpinjong shipped 3.5 million short tons at an average realised price of $42 per ton, which included 1.6Mt of export sales at an average realised price of $65/t and 1.9M/t of domestic sales at an average price of $22/t.

This means Wilpinjong effectively lost $38 million supplying its domestic contracts.

Wilpinjong contributed approximately $56.5 million out of the company's total $289.1 million in adjusted earnings before interest, tax, depreciation and amortisation for the September quarter.

The mine completed $5 million of capital expenditure and had $145.5 million of cash and cash equivalents at September 30 2021.

It is anticipated Wilpinjong's fourth quarter volumes will be split about 2Mt of export shipments and another 2Mt of domestic shipments.

Peabody Energy CEO Jim Grech said the company was "capturing opportunities provided by current robust coal market dynamics with strong operational performance, which is resulting in expanded margins across our portfolio".

"While we are optimistic regarding the markets, we continue to focus on the long term with a disciplined approach to cost control, pricing strategies and additional reduction of debt to position the company to be resilient in all market cycles," he said.

Overall, Peabody's seaborne thermal segment shipped 4.5Mt including 2.6Mt of exports at an average realised price of $86/t. There was also 1.9Mt sold under domestic contracts during the quarter.

Third quarter seaborne thermal segment costs of $35.09/t increased 27% compared to the prior year, primarily due to ongoing transition to the Wambo JV and Wilpinjong extension project, higher royalties, unfavourable exchange rates, and higher fuel prices.

The seaborne thermal segment's adjusted EBITDA margins nearly doubled to 40% from 22% in the prior year. It reported a third quarter adjusted EBITDA of $104.4 million.