Peabody Energy Announces 2009 Production Cutbacks

Peabody’s Rawhide mine in the Powder River Basin shipped more than 17 million tons of coal in 2007 and
was one of the most productive mines in the nation. The company recently announced production target
cuts for its PRB operations.
Peabody Energy announced in early January that it is reducing its 2009 targets for Powder River Basin coal and Australian metallurgical coal production, reflecting the effects of the global recession.

The company’s 2009 U.S. production is now targeted at 190 to 195 million tons, compared with actual 2008 production in excess of 200 million tons. Targeted 2009 Powder River Basin volumes are being reduced by approximately 10 million tons from 2008 levels to better match production with expected demand and address the current excess customer inventories. The Powder River Basin reductions will be concentrated in lower-quality, lower-margin coal products. Equipment will be relocated to other locations to optimize production and reduce capital spending. Following these cutbacks, U.S. production is essentially fully priced for 2009.

The company’s 2009 metallurgical coal production from Australia operations also will be reduced by up to 2 million tons due to the decline in worldwide steel demand. The company’s total Australia production is expected to be 22 to 24 million tons in 2009 compared with 2008 sales of approximately 24 million tons.

“We are taking prompt market-driven actions to make adjustments to our production platform and respond to the global economic downturn,” said Peabody Chairman and CEO Gregory H. Boyce. “We remain confident in the mid- and long-term outlook for coal demand and expect Peabody to prosper in this environment as we await an economic rebound.”

Actual 2009 production will depend on a number of factors, including the speed of recovery in global markets for electricity generation and steel, as well as the magnitude and timing of stimulus initiatives in the United States, China and other nations.

As featured in Womp 09 Vol 01 -