Peabody close to going bust in Australia

07 June 2016, Week 22 Issue 360

There is “significant uncertainty” over whether major Peabody Energy can continue its operations in Australia as a viable business after recording losses of almost US$2 billion for 2015, company auditors warned.

Peabody produces 20% of Australia’s coal, over 35 million tonnes per year, and employs 3,500 workers in nine mines.

The international miner filed for Chapter 11 bankruptcy in the US in April but said its Australian operations were unaffected, a view supported at the time by the Minerals Council of Australia.

Chapter 11 is a protective measure under American law to allow a company to continue operating while seeking to restructure debt problems. Peabody has accrued debts of over US$10 billion.

However, Peabody Australia Holdco suffered net losses of A$2.7 billion (US$1.98 billion) in 2015, it was disclosed last week in a filing with the Australian Securities and Investments Commission.

Peabody Australia’s auditor Ernst & Young warned in the company’s accounts that it had doubts whether the subsidiary could continue in its present form without financial support from the beleaguered US parent, ABC radio said.

“There is significant uncertainty whether the company and/or the consolidated entity will continue as a going concern, and therefore whether they will realise their assets and extinguish their liabilities in the normal course of business,” the ABC quoted the auditor saying.

Peabody Australia was lent US$250 million in April, the ABC said, adding that it owed several billion US dollars to firms owned by the US parent.

According to a statement in April, its Australian operations were unaffected by the US bankruptcy action. The US parent in April cited weak coal prices and the slowdown in China’s economy for its financial problems.

But in May Peabody Australia sold some of its best undeveloped coal tenements in Queensland State’s Bowen Basin to Australian private equity fund Pembroke Resources for US$76.6 million.

“Pembroke hinted that more coal acquisitions could be made, and the company was now shaping up as a likely buyer of some of Peabody’s developed coal mines in Queensland,” the Sydney Morning Herald said.Industry analysts have suggested that coal prices will bottom out this year.

Edited by

Richard Lockhart


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