Peabody, Glencore to combine two neighbouring Australian coal mines

MELBOURNE, Nov 25 (Reuters) - Peabody Energy Corp (NYSE: BTU - news) and Glencore Plc (Xetra: A1JAGV - news) have agreed to form a joint venture at two neighbouring mines in Australia's Hunter Valley, in a bid to slash costs amid a slump in coal prices.

Peabody, the world's largest publicly traded coal producer, and Glencore, the world's top thermal coal exporter, said on Tuesday they would combine their Wambo and United open cut coal mines in a 50-50 joint venture that could produce 6 million tonnes a year of thermal coal used in power stations.

The plan, expected to take effect in mid-2017, would improve recovery of coal from the combined operations and sharply cut capital and operating costs, the two companies said, without putting a dollar figure on the potential savings.

"Peabody continues to take positive steps to further reduce costs, improve our competitive position and create value," Peabody President and Chief Operating Officer Glenn Kellow said in a statement.

From 2017, the plan is for workers from Peabody's Wambo open cut mine to move to Glencore's United mine, which is currently not operating and has no workforce. Glencore will run the mine using existing infrastructure, while Peabody would operate coal washing and loading facilities.

The joint (NasdaqCM: JYNT - news) venture does not include Peabody's Wambo underground mine.

The Construction, Forestry, Mining and Energy Union said the move would help preserve jobs and investment in a region that has suffered from the coal downturn over the past two years.

"It is very welcome news at a time when our region is suffering from substantial job losses in the coal industry," CFMEU district president Peter Jordan said in a statement.

Glencore has been looking for ways to slash costs in the Hunter Valley, and had earlier looked to form a coal joint venture with Rio Tinto (Xetra: 855018 - news) , which also runs mines in the area.

Glencore declined to comment on whether it was still looking at a joint venture with Rio Tinto. The company approached Rio Tinto about a full merger earlier this year but was rebuffed. UK rules restrict it from making a further approach to Rio Tinto until April. (Reporting by Sonali Paul; Editing by Richard Pullin)