Peabody to count cost of coal mine fire in third-quarter report as areas of North Goonyella mine sealed

Peabody Energy says it will take an unspecified financial hit after a fire broke out at its North Goonyella coal mine in Queensland.

Longwall mining at North Goonyella mine 160km west of Mackay in Queensland's Bowen Basin.

Peabody Energy will take equipment writedowns on its North Goonyella mine in Queensland in its third-quarter profit report and suffer unspecified financial impacts, after a fire stopped mining there indefinitely.

The outage has helped boost prices of high quality Queensland coking coal, adding to supply concerns over coal rail owner Aurizon Holdings’s fight with state regulators and coming at a time when China’s environmental policies have boosted demand.

There is still no indication of when or if Peabody’s flagship Goonyella North mine will restart.

“While still too early to offer meaningful insights into the financial effects or timing of next steps, the company expects financial impacts to future periods,” Peabody said today.

“Peabody intends to provide an initial look at financial and other impacts at the time of third quarter earnings, including recording a provision for the third quarter related to equipment expected to be sealed in the completed longwall panel.”

Industry reports say the equipment that will be sealed in is 76 roof supports, with the rest of the mining longwall having been removed as part of a scheduled change after the section of coal that was being mined was completed.

Force majeure notices have been issued to the mine’s customers.

St Louis-based Peabody will report its third quarter results on October 30.

The company said it would seal the completed longwall panel where gas emissions were first encountered and would permanently seal an area where high methane level were concentrated.

Underground coal mine fires are notoriously difficult to contain and recover from. The last big Australian underground coal mine fire, at Xstrata’s Blakefield South mine in the Hunter Valley in 2011, stopped production for 18 months.

Peabody has temporarily sealed three of the mines five entrances and is injecting high-moisture inert gases to displace oxygen and reduce the conditions for a fire.

“Sampling of underground gases has shown levels on general downward trends in the past two weeks, with the exception of when the GAG unit (which injects the inert gases) was undergoing maintenance,” Peabody said.

“The one open shaft continues to emit little or no water vapour or white smoke. Air quality monitoring equipment remains in place around the perimeter of the mine with continued good results.”