NYSE-listed Peabody on Tuesday announced solid results for the third quarter, despite ending the three-month period with substantial challenges at the fire-hit North Goonyella mine, which remains idled.

The miner reported revenue of $1.41-billion, compared with $1.48-billion a year earlier, and net income of $79.8-million, down from $230-million in the September 2017 quarter.

Adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) for the third quarter totalled $372.1-million, compared with $411.3-million in the prior year period, and includes about $9-million in expenses related to containment activities at the North Goonyella mine. 

Australian sales volumes totalled 7.6-million tons, including 2.8-million tons of metallurgical coal sold at an average price of $132.50/t and 2.9-million tons of export thermal coal sold at an average price of $92.08/t, with the remainder delivered under a long-term domestic contract.

Peabody said that the Australian thermal segment had led the company with adjusted Ebitda of $145.3-million and adjusted Ebitda margins of 48%. The events at North Goonyella resulted in third quarter Australian metallurgical adjusted Ebitda declining by about $52-million to $90.7-million. Adjusted Ebitda for the US operations totalled $155.4-million compared with $196.7-million in the prior year.  US adjusted Ebitda margins totalled 21%, with 24% margins from the Powder River Basin. 

Meanwhile, Peabody reported that the company was transitioning to the assessment/planning phase of managing the fire incident at North Goonyella, in Queensland. This phase involves mapping of the heated area and monitoring of temperatures, gas levels, seismic activity, surface air quality and camera imaging. These actions come before advanced planning for re-ventilation, mine re-entry and potential restart of operations. 

Should mining be able to resume, multiple scenarios were being evaluated. If the next panel (10 North, which is already developed) is accessible, production would be targeted for the second half of 2019, whereas southern panels (GM South) access would likely extend to 2020 given that development was in early stages.

“The company is exploring all reasonable mine-planning steps given the long-lived nature of reserves and compelling margins of the mine during times of strong industry conditions,” it said in its third-quarter results announcement.

Peabody has recorded a $49.3-million charge for estimated equipment loss, including 78 shields and ancillary equipment sealed in the completed 9 North panel area.  The majority of this charge is expected to have a cash impact related to leased equipment. The current book value of North Goonyella following the charge is $284-million, including unmined panels in the north and south portions of the current seam, lower-seam reserves and surface facilities. The mine also contains $61-million in leased equipment not within the sealed and mined-out 9 North panel.

In the fourth quarter, Peabody estimates $20-million to $25-million in containment, monitoring and planning costs, along with about $15-million to $20-million in costs to keep the mine in idle status pending any future re-entry.

"During a quarter that ended with substantial challenges at the North Goonyella mine, Peabody's large, diversified platform generated solid results, led by our Australian thermal coal segment," said Peabody president and CEO Glenn Kellow. 

"While our operational focus is on our current platform, entering the assessment and planning phase of the North Goonyella mine, and completing the accretive Shoal Creek metallurgical coal mine acquisition in Alabama, our financial approach is unchanged. We are committed to generating cash, maintaining financial strength, investing wisely and returning cash to shareholders – demonstrated by our expanded share buyback programme and increased dividend per share."  

The company repurchased $325-million of common stock in the quarter, bringing total share repurchases under its $1-billion share repurchase programme to $875-million since August last year.  To date, the company has repurchased a total of 22.8-million shares under the programme, representing 17c of shares initially outstanding on a fully converted basis. In light of expected continued strong cash flows and robust liquidity, the company has announced it has expanded its share repurchase authorisation by an additional $500-million to $1.5-billion. 

Peabody's board of directors has increased the company's quarterly common stock cash dividend from $0.125 a share to $0.13 a share.

The $400-million acquisition of the Shoal Creek metallurgical coal mine from Drummond is expected to close in the fourth quarter. The sales process is moving through the regulatory approvals process.  In addition, Drummond is negotiating a collective bargaining agreement with the union-represented workforce, which is a condition precedent for closing, and union-represented workers must agree to elimination of participation in the multi-employer pension plan and replacement with a 401(k) programme. 

Shoal Creek is located in Central Alabama and serves Asian and European steel mills with high-vol A coking coal.  In 2017, Shoal Creek sold 2.1-million tons.