Peabody Energy is pursuing life extension projects to maintain its Australian export thermal coal volumes at both its Wambo and Wilpinjong mines. The company continues to advance an unincorporated joint venture with Glencore to extend the life of the Wambo open-cut mine, which is expected to commence production in early 2020. The Wilpinjong extension project, which extends the life of the Wilpinjong mine to 2030, is progressing.
Peabody expects to invest approximately $100 million over each of the next two years related to both the Wambo joint venture and the Wilpinjong extension project. In total, the company is targeting sales between 11.5 million and 12.5 million tons of export thermal coal in 2019.
Peabody’s Millennium mine in Australia will close as planned in 2019.
It said it is will target higher metallurgical coal volumes beginning in 2020 with mining activities at North Goonyella returning to normal early next year. At North Goonyella, Peabody has identified a base case that targets limited continuous-miner volumes in 2019 with longwall production beginning to ramp up in early 2020. The base case contemplates approximately 2 million tons of sales from North Goonyella in 2020.
As part of Peabody’s recovery plan for North Goonyella, which suffered a fire last year, the team is executing a multiphased re-ventilation and re-entry project targeted to commence in the first quarter 2019. The stage-gate approach, according to company, provides an opportunity to periodically re-evaluate progress, costs and investments.
Peabody completed its purchase of the Shoal Creek mine for $387 million in December, and full integration of the mine into its operations is well under way. In 2019, the company expects the Shoal Creek to ship approximately 2.5 million short tons of high-vol A metallurgical coal to Asian and Atlantic steel customers.
At this time, Peabody expects idling and project costs to average $30 million to $35 million per quarter in 2019, with first quarter costs expected to come in above the high-end of that range. The company is targeting approximately $110 million in capital for North Goonyella, including previously planned new longwall equipment. It also is anticipating recovery of $125 million in insurance proceeds in 2019.
For U.S. thermal operations, Peabody is projecting less 2019 U.S. sales volumes compared to 2018 in the face of lower domestic demand. Production from its North Antelope Rochelle mine will be reduced by 10 million tons. With this reduction, the company enters 2019 with approximately 90% to 95% of Powder River Basin volumes priced.
In the Midwest, Peabody said it is also easing production across several complexes. Western segment volumes are expected to decline year over year in line with actions involving the announced closure of the Navajo Generating Station by year-end. Peabody’s base case is that the Kayenta mine’s production and sales are expected to cease in the third quarter given plant inventory levels.
