Good news on the coal front bodes well for Wesfarmers

Recent comments reported in the Australian Financial Review by CEO Mr Gregory Boyce of US-based Peabody Energy (NYSE: BTU) suggesting that Peabody’s Australian coal mining operations are starting to become internationally competitive again, thanks to the fall in the Aussie dollar and restructuring initiatives across Peabody’s mine sights, is good news not just for Peabody but other coal producers as well.

Peabody has substantial coal operations in the USA and Queensland and New South Wales. Boyce’s comments bode well for other coal miners including Wesfarmers (ASX: WES). Wesfarmers owns the Curragh mine in Queensland’s Bowen Basin and has a 40% share of the Bengalla mine which is located in the Hunter Valley, NSW.

Of course, as they say, ‘one swallow does not make a spring.’ Wesfarmers recently announced that it had reduced contract prices for metallurgical coal from its Curragh mine by 15%, which means that like Peabody, it will need to be cutting costs and getting the full benefit of the lower dollar to stay competitive.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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