Rain slows Peabody, Xstrata coal output

PEABODY Energy and Xstrata Coal have indicated heavy rains will temporarily slow operations at their coal mines in Queensland and NSW, though the final impact on production is likely to be minimal.

Peabody, the largest coal miner in the US, half-owns the Middlemount mine in Queensland. Its levee was breached this week, flooding the pit.

The chief executive, Greg Boyce, in a briefing on last year's results, said Peabody was still assessing the damage. "There have been impacts across Queensland and NSW. We don't have a full answer at this point in time. The numbers that we've given for the quarter don't assume unusual impacts from rain events."

But Mr Boyce said the worst damage was to the Blackwater and Moura rail systems which supplied the Port of Gladstone, and "the good news for us is we don't ship through the Gladstone Port, so the rest of our rail network is essentially open".

On Tuesday night Xstrata Coal declared force majeure on several thermal coal export vessels from the Port of Gladstone, as a result of flood damage to the Blackwater rail system, run by the former QR National, now called Aurizon.

All Xstrata mines were back in operation on Wednesday. Aurizon had no update but has said it expected the lines would be down for seven to 10 days.

At the end of the year Peabody wrote down the value of its Australian assets by $US884 million ($884.24 million) despite record volumes, based on lower realised coal prices and the high dollar.

Australian earnings before interest tax depreciation and amortisation were $US939 million, impacted by more than $US430 million in price falls compared to 2011.

Peabody shares jumped 5.6 per cent to $US26.56 in the US after it said the global coal market was showing signs of a recovery and metallurgical coal prices were bottoming.

Mr Boyce told analysts: "The current challenges of the wet season in Indonesia and Australia ... are a reminder that ultimate met and thermal coal shipments generally run at a healthy discount to nameplate capacities."

Mr Boyce said supply problems in Mozambique and Mongolia underlined the value of Peabody's Australian assets.

"We know we can mine those coals and get them to market. And the concept that all of a sudden the markets going to be always supplied with high quality, hard met coal from all these frontier areas, I think we're seeing it's just not the case," he said.

"Even if you have to pay a little higher royalty or tax out of Australia, it's still the right zip code to be producing high quality met coal."