Peabody Energy Corporation
) has announced that it will permanently discontinue coal
production at its Air Quality Mine in Vincennes, Indiana, due to
weak market conditions.
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To continue with its mine shut down process, Peabody plans to
circulate Worker Adjustment and Retraining Notification ("WARN")
letters to its 230 employees. This letter will include a plan of
60-day period for a job transition. Peabody will also create
placement opportunities for the existing employees at other
As a result of this action, Peabody expects to incur $75 million
one-time non-cash after tax charges at the end of third-quarter
We view Peabody's planned production curtailment program as a good
move with respect to present coal consumption trend. During
second-quarter earnings, the company projected full-year 2012 total
U.S. coal demand to decline by 100 to 120 million tons, due to
lower coal-fueled electricity generation resulting from a sluggish
economy and low natural gas prices.
In addition, this measure will enable Peabody to curtail its
operating costs, which in turn will help the company to improve its
Consol Energy Inc.
) pursued the same strategy and temporarily stalled operations at
its Buchanan Mine in southwestern Virginia owing to soft coal
In second-quarter 2012, Peabody's total sales volume was 57.4
million tons compared with 57.8 million tons in the year-ago
quarter. During second-quarter 2012 earnings call, the company
reported its full-year 2012 sales guidance of 230 - 250 million
We believe that sluggish recovery of the U.S. economy and the lower
gas prices are denting the demand for coal in the U.S. markets.
These factors primarily induced Peabody to slash its 2012 capital
expenditure budget by $200 million to $1.0 billion.
Peabody Energy Corporation currently retains a short-term Zacks #5
Rank, which translates into a short-term Strong Sell rating.
St. Louis, Missouri-based Peabody Energy Corporation is the world's
largest private sector coal mining company and a global leader in
clean coal solutions. The company owns majority interests in 29
mines in the U.S. and Australia.