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Other Events
9 Months Ended
Sep. 30, 2020
Other Events [Abstract]  
Other Events Other Events
Cost Repositioning Program
From time to time, the Company initiates restructuring activities in connection with its repositioning efforts to appropriately align its cost structure or optimize its coal production relative to prevailing market conditions. Costs associated with restructuring actions can include the impact of early mine closures, voluntary and involuntary workforce reductions, office closures and other related activities. Costs associated with restructuring activities are recognized in the period incurred. Such charges included as “Restructuring charges” in the Company's unaudited condensed consolidated statements of operations amounted to $8.1 million and $0.7 million for the three months ended September 30, 2020 and 2019, respectively, and $31.1 million and $1.3 million for the nine months ended September 30, 2020 and 2019, respectively, and were associated with both involuntary and voluntary workforce reductions.
On October 5, 2020, the Company announced that it is temporarily idling its Shoal Creek Mine in Alabama over the next several months. While steelmaking fundamentals, particularly in traditional markets, appear to be in the early stages of recovery from the COVID-19 pandemic, customer demand has been and continues to be impacted. These market factors, combined with a currently elevated cost structure at the mine, have led to the decision to temporarily suspend production. The Company will seek to implement productivity improvements during the idle period.
United Wambo Joint Venture with Glencore
In December 2019, after receiving the requisite regulatory and permitting approvals, the Company formed an unincorporated joint venture with Glencore plc (Glencore), in which the Company holds a 50% interest, to combine the existing operations of the Company’s Wambo Open-Cut Mine in Australia with the adjacent coal reserves of Glencore’s United Mine. The Company proportionally consolidates the entity based upon its economic interest.
Both parties contributed mining tenements upon formation of the joint venture. Construction and development efforts are currently underway to combine operations. During the nine months ended September 30, 2020, the Company contributed approximately $45 million towards construction and development, which is reflected as “Additions to property, plant, equipment and mine development” in the accompanying unaudited condensed consolidated statements of cash flows. The joint venture agreement specifies that the Company will continue to fully own and operate the existing Wambo Open-Cut Mine through the date that development of the combined operations is completed, which is currently expected to be during the fourth quarter of 2020. The parties will then contribute mining equipment and other assets, and joint operations will commence. Glencore is responsible for construction and development activities and will manage the mining operations of the joint venture.
PRB Colorado Joint Venture with Arch
On June 18, 2019, the Company entered into a definitive implementation agreement with Arch, to establish a joint venture that would have combined the respective Powder River Basin (PRB) and Colorado operations of Peabody and Arch. As further described in Note 18. “Commitments and Contingencies,” on February 26, 2020, the U.S. Federal Trade Commission (FTC) sought a preliminary injunction to challenge the Company’s proposed joint venture. On September 29, 2020, the United States District Court for the Eastern District of Missouri (the District Court) granted the FTC’s request for a preliminary injunction. Effective September 30, 2020, Peabody and Arch terminated their agreement to establish the joint venture.
North Goonyella
The Company’s North Goonyella Mine in Queensland, Australia experienced a fire in a portion of the mine during September 2018 and mining operations have been suspended since then. During 2018 and 2019, the Company recorded provisions for equipment losses amounting to $149.6 million related to the fire, representing the best estimate of losses to date. Of that amount, $24.7 million was recorded during the nine months ended September 30, 2019. No additional provisions for equipment losses were recorded during the three and nine months ended September 30, 2020. The Company has also incurred containment and idling costs subsequent to the mine’s suspension which amounted to $3.8 million and $29.3 million during the three months ended September 30, 2020 and 2019, respectively, and $25.2 million and $94.6 million during the nine months ended September 30, 2020 and 2019, respectively.
In March 2019, the Company entered into an insurance claim settlement agreement with its insurers and various re-insurers under a combined property damage and business interruption policy and recorded a $125 million insurance recovery, the maximum amount available under the policy above a $50 million deductible. The Company has collected the full amount of the recovery.
The Company is currently evaluating various alternatives regarding the future utility of the mine. In the event that no future mining occurs at the North Goonyella Mine or the Company is unable to find a commercial alternative, the Company may record additional charges for the remaining carrying value of the North Goonyella Mine of up to approximately $300 million, which is included in the at-risk value described in Note 9. “Property, Plant, Equipment and Mine Development.” Incremental exposures above the aforementioned include take-or-pay obligations and other costs associated with idling or closing the mine.