From Bloomie:
Peabody Energy Corp. filed for bankruptcy on Wednesday, the most powerful convulsion yet in an industry that’s still waiting for the coal market to bottom out.
…The outcome of the case may turn on what trajectory coal prices take over the course of the reorganization, with battles over environmental obligations and non-bankrupt Australian operations complicating matters, according to analysts and environmental activists.
The price of metallurgical coal has tumbled about 75 percent since its 2011 peak. That’s been particularly painful for Peabody, which spent $4 billion in 2011 to acquire Australia’s MacArthur Coal Ltd. to expand its sales of the steelmaking component. Australian operations, which are among the leading producers of seaborne metallurgical coal, continue as usual and aren’t part of the bankruptcy, according to court papers.
“It wasn’t a question of whether Peabody was going to file, it was a question of when and would they include the Australian assets,” Jeremy Sussman, a New York-based analyst for Clarksons Platou Securities Inc., said by phone Wednesday. He called the MacArthur acquisition “ill-fated.”
“I very much expect them to go through a restructuring where the vast majority of assets that are producing today will produce for the foreseeable future,” Sussman said. “It’s much more of a balance sheet restructuring than anything else.” The analyst said most of Peabody’s mines make money, unlike those belonging to other bankrupt miners, such as Walter Energy Inc. or Alpha Natural Resources Inc.
That is not what is required. We need closed mines. But therein lies the long and grinding horror of a commodities bust. The dirt keeps flowing even in bankruptcy. Not until everything is materially and sustainably below cash cost does anything shut permanently.
