Speculation is growing that one of the world’s largest mineral producers could exit its Australian coal operations.
Peabody Energy has decided to take “aggressive actions” to cut costs, and the US-headquartered company is rumoured to be negotiating a debt exchange offer with a large syndicate of North American lenders.
Sources told News Limited the future of the company depends on the deal reaching fruition. If it fails there is a good chance the proponent might have to return to chapter 11 bankruptcy status, meaning the business would begin restructuring its assets and debt. This would possibly lead to the sale of a number of Australian coal operations.
Coal mines that could be sold off include one or more of the following:
- Coppabella Pulverised Coal Injection (PCI) Coal Mine, 140km southwest of Mackay Queensland
- North Goonyella Underground Coal Mine, 160km west of Mackay Qld
- Metropolitan Underground Coal Mine, 30km north of Wollongong New South Wales
- Middlemount PCI Coal Mine, 90km northeast of Emerald Qld
- Moorvale PCI Coal Mine, 156km southwest of Mackay Qld
- Wambo Coal Mine, 92km northwest of Newcastle NSW
- Wilpinjong Coal Mine, 58km northeast of Mudgee NSW.
Up to 2650 workers affected
Peabody employs an estimated 2650 workers across Australia, according to the latest data from research consultancy Dun & Bradstreet’s website. It is uncertain whether a sell off would also result in job losses.
The proponent previously reduced its operating expenses by 39 per cent and avoided further restructuring because spot coal prices jumped.
Coal exports crash
However, the latest coking coal export data from the Commonwealth Bank of Australia shows Australian coal exports to China have dropped 47 per cent in October 2020 compared to the previous corresponding month a year ago.
Coal exports to China also fell 27 per cent in the same month compared to September 2020 due to the ruling Chinese Communist Party’s (CCP) decision to delay shipments from arriving at Chinese ports.
Poor quality blamed
China’s Foreign Ministry blamed Australian mining companies for selling poorly refined coal that releases more carbon dioxide into the atmosphere.
“China Customs has found many cases where the imported coal did not meet our environmental protection standards while conducting risk monitoring and analysis over the safety and quality of imported coal,” Chinese Foreign Ministry spokesman Zhao Lijian said in a public statement.
“In accordance with relevant laws and regulations, customs officials have strengthened quality, safety and environmental inspections of imported coal to better protect the legitimate rights and interests of Chinese companies and ensure environmental safety.”
Quality complaint rejected
However, the Minerals Council of Australia (MCA) completely rejected the CCP’s claims about substandard coal.
“Reports suggesting Australian coal shipments to China may have failed to meet environmental and safety standards are inconsistent with decades of experience by Australia’s coal companies in delivering high-quality coal to customers across the world,” MCA CEO Tania Constable said in a public statement.
“Australian coal is generally amongst the best quality coal in the world, regarded highly for its energy content, low impurity and its efficiency as a coking agent in the production of steel … Australia’s reputation as a reliable supplier is based on many decades of supplying high-quality coal to customers around the world and particularly in our region.”
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It is unclear whether any previous Australian coal orders will be permitted through China Customs as a number of cargoes are experiencing either delays or defaults.
QMEB understands souring Australia-China relations could mean future coal orders will be sourced from Russia and Indonesia instead.