Perth (Platts)--28Nov2012/529 am EST/1029 GMT

Centennial Coal, a 100%-owned subsidiary of Thailand coal company Banpu, said Wednesday it intends to temporarily close two of its New South Wales coal mines starting January for a care and maintenance program, which would see an approximate loss of 1 million mt/year of coal production.

Centennial will also defer some capital spending on new projects and 40 job losses are planned across the company, it said in a statement posted on its website Wednesday.

Centennial chief operating officer, Steve Bracken, said in the statement that the decision to halt production at Airly and Mannering mines had been taken by a combination of factors including low market prices for coal, difficult mining conditions and poor coal quality.

"In the current market, their [the two coal mines] losses can no longer be absorbed without negatively impacting the group's overall performance," said Bracken.

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The production and expenditure cuts follow a company-wide review by Centennial of its coal mining operations initiated because of the strength of the Australian dollar versus the US dollar.

The high Australian currency's exchange rate relative to the US dollar in which seaborne coal is priced, and lower international coal prices, were cited by Centennial as factors that had weighed on the coal producer over the past few months.

Airly and Mannering mines will continue to meet safety and environmental regulations while on care and maintenance, and the sites appropriately maintained to enable their reopening once market conditions improve, said the company in its statement.

The Mannering underground mine in the Newcastle coalfield supplies thermal coal to the Vales Point power station near Lake Macquarie and the mine's coal production in 2011 was 560,000 mt.

Airly mine is an underground operation in the Western coalfield of New South Wales with a production capacity of 1.8 million mt/year, but production last year was only 500,000 mt and was sold into the export market via Port Kembla coal terminal, according to Centennial's website.

The rationalization of Centennial's coal assets leaves the company with eight operating coal mines in New South Wales.

The coal producer mined 4.8 million mt of Australian coal in the quarter ended September 30, up 11% year on year, and its average sales price for the period was A$70 ($73)/mt, said Banpu in a company presentation.

Centennial Coal was acquired by Bangkok-listed Banpu in 2010 for A$2.5 billion, and the Australian coal company sells approximately 40% of its coal to overseas customers and the remainder is sold to New South Wales coal-fired power stations.

--Mike Cooper, michael_cooper@platts.com --Edited by Haripriya Banerjee, haripriya_banerjee@platts.com

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