Peabody says Wambo drill rig collapse 'absolutely' not related to closure of underground mine

The closure follows what the NSW government Resources Regulator described as a "dangerous incident" at the mine, in which a drilling rig on the surface collapsed into a ventilation shaft, as shown by the accompanying photograph.

The rig collapse happened on May 3 but Peabody said speculation linking this to the mine closure was "completely incorrect".

Peabody pointed to a quarterly earnings result posted on April 29 - before the rig collapse - in which chief executive and president Glenn Kellow said he was "expediting a detailed mine-by-mine analysis" after the company posted a loss of $US129.3 ($194 million) for the first three months of 2020.

Peabody said state mining inspectors did not order the company to shut Wambo underground.

This was confirmed late yesterday by the regulator, which also said the results of its "initial investigation report' would be published shortly.

Peabody runs two operations at Wambo.

As well as the underground mine that will cease production, Peabody has a joint venture open-cut with Glencore, which began when in 2014 when it combined its Wambo open-cut with the Glencore/CFMEU United lease.

Peabody said the closure affected the underground mine only.

A written statement on the decision contained no details on job losses but the Herald understands about 100 of the 280-strong underground workforce will be out of work for up to three months from June 19, although the total will not be known until negotiations are finalised with the union.

The CFMEU declined to comment.

Peabody said that like many other mining operators in Australia it had been affected by "incredibly challenging global economic conditions" caused by COVID-19 and was "taking steps to align our production with current coal demand".

"We have made the very difficult decision to temporarily suspend production in a part of the mine while maintaining essential development work to support future production."

The decision to continue development work has been taken to show the company is determined to reopen the underground mine.

"We have fully and openly communicated our decision and the reasons for it to our team and thank them for their understanding and ongoing commitment to our operations."

Peabody's website says Wambo underground sold 2.2 million tonnes of coal last year, while the open-cut sold 3.3 million tonnes, also with a workforce of 280.

Prices for Newcastle thermal coal have dropped dramatically in recent months but had recently risen back above the $US50 ($75) a tonne mark on the spot market, which gives prices for single "one-off" rather than long-term contracted cargoes.

Peabody describes itself as the world's biggest privately owned coal company, but as confirmed by a statement on its website, it and 153 of its subsidiaries were forced to file for Chapter 11 bankruptcy protection in the United States in April 2016, with debts of $US8.8 billion ($13 billion).

After negotiations with creditors it emerged from bankruptcy a year later with its debts reduced by more than $US5.2 billion ($7.7 billion), allowing it to relist on the New York Stock Exchange.

Peabody's April 29 statement made no direct mention of Wambo but the company said cost-cutting had resulted in the "elimination of approximately 250 positions" from some US mines.

"This follows the reduction of approximately 215 operational positions, including contractors, in the first quarter across eight mines in the US and Australia to align with industry conditions," Peabody said.

Despite the spectacular nature of the April 3 Wambo drill rig incident, it appears nobody was injured.

The Resources Regulator said: "While drilling contractors were drilling a ventilation shaft from the surface of an underground coal mine, they noticed a loss of return water from the shaft.

"Drilling was stopped.

"It was identified that a bulkhead, installed underground to isolate the shaft construction from the mine workings, had failed.

"Further ground movement into the shaft void destabilised the drilling rig and platform, which partially collapsed into the collar of the shaft.

"The Resources Regulator is carrying out a causal investigation with the cooperation of the relevant stakeholders.

"A preliminary report will be published soon."

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