Glencore and Peabody form joint venture to cut costs

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Image credit: flickr user: Ian Sanderson

Coal giants Peabody Energy and Glencore have agreed to form a 50/50 joint venture which will see the companies combine infrastructure from two of their NSW mines to operate an open-cut ­project in order to trim costs.

Image credit: flickr user: Ian Sanderson
Image credit: flickr user: Ian Sanderson

According to Bloomberg, the deal will merge Glencore’s United mine and Peabody’s Wambo mine in the Hunter Valley, helping both companies to use the resources efficiently and extend mining life by sharing their accumulated expertise.

The project, which is to commence in 2017 and is subject to regulatory approvals, is expected to unlock a significant coal resource that has been constrained by the nature of the existing United and Wambo leases.

“Output from some of Glencore’s existing operations will decline by 2017, so the JV enables us to grow value for shareholders without growing volume,” the company said in a statement.

According to The Australian, Glencore’s United mine has been on care and maintenance since 2010, while Peabody’s Wambo mine has been operating since 1969 and was acquired by the US energy giant in 2006.

“Peabody continues to take positive steps to further reduce costs, improve our competitive position and create value. This combined operation is expected to deliver substantial synergies to both parties while providing ongoing local employment opportunities and economic contributions,” said Glenn Kellow, Peabody Energy President and Chief Operating Officer.