TAX NEWS - June 2010
Peabody Slows Work on Australian Coal Expansions on Mine Tax
"As we're reviewing the new potential working environment as a result of the tax, progress on our expansions has slowed," Jennifer Morgans, a spokeswoman for St. Louis-based Peabody, said today by phone. "The timing and the eventuality of those investments depend on the operating environment."
Peabody joins BHP Billiton Ltd., Fortescue Metals Group Ltd. and Xstrata Plc in reviewing, suspending or slowing projects. The decision by the U.S. company, which operates eight mines in Australia, may intensify pressure on the government to wind back its proposed 40 percent tax on mine profits.
"Peabody is committed to investing in Australia, however, all projects are undergoing further scrutiny and consideration with regards to the tax and additional costs that will impact on the business," said Morgans by phone from Brisbane, Australia.
Expansions at the Eaglefield, Millennium and Wilkie Creek coking coal mines in Queensland state may boost their output from a combined 9.2 million metric tons to as much as 32 million tons, based on company data. Peabody is also working on the Wambo and Wilpinjong thermal coal expansions in New South Wales.
"We have maintained our pace on initial advice statements and environmental impact statements, but the fact that we have to incorporate the tax into these documents has slowed that progress," said Morgans.
Peabody Chief Executive Officer Greg Boyce said in November last year that he planned to double output from Australia during the next five years, boosting its contribution to global earnings to as much as 40 percent. The company sold 22.3 million tons of coal from Australia last year.
The company last month cut the price of its offer for Macarthur Coal Ltd., citing the tax and a study of the target's finances. Macarthur rejected the A$3.8 billion ($3.2 billion) bid.
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