) decision to permanently shut down its Willow Lake Mine near
Harrisburg, Illinois, is going to directly impact 400 employees
working in that mine. The mine is being operated by Big Ridge
Inc, a subsidiary of Peabody Energy.
The Willow Lake Mine has failed to meet acceptable standards for
safety, compliance and operating performance. This makes
operation in the mine unsafe and risky. Despite selling 2.1
million tons of coal from this mine in 2011, the management at
Peabody had to take the difficult decision of closing the mine.
With another holiday season round the corner, the news is a hard
reality for the 400-odd employees of the idled mine. They have
already been provided with Worker Adjustment and Retraining
Notification (WARN) letters. However, when we recall the tragedy
that befell Massey Energy's underground mine at Upper Big Branch,
the move by Peabody seems justified. Another operator
) decided to idle its Miller Creek surface mine in Naugatuck in
West Virginia. CONSOL has already issued WARN letters to its
employees citing environmental reasons.
The decision to shut down the Willow Lake Mine is not going to
impact the ongoing earnings of Peabody Energy. The company will
take a one-time charge between $40 million and $60 million or 10
cents and 15 cents per share after tax in the fourth quarter. The
one-time charge will go mainly to write off assets, increase
asset retirement obligations and accrue severance.
In September 2012, Peabody Energy decided to permanently close
its Air Quality Mine in Vincennes, Indiana. The tepid demand for
coal was making the operation of this mine uneconomic, leading to
Peabody is working aggressively towards lowering its operational
costs and implementing different cost-cut measures to make annual
cost savings of $100 million. The worldwide demand for coal
continues to remain choppy and other large coal operators are
also lowering production volumes by temporarily idling mines.
St. Louis, Missouri based Peabody Energy Corporation is a private
sector coal mining company. The company has interests in 28 coal
operations located in the United States and Australia, and has
joint venture interests in a Venezuelan mine. Peabody Energy
retains a short-term Zacks #3 Rank (Hold rating).
PEABODY ENERGY (BTU): Free Stock Analysis
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