UPDATE 3-Peabody counts on Australian operations to lift earnings

Tue Jan 29, 2013 1:46pm EST

* Sees Q1 adj loss $0.04/shr to $0.26/ shr vs est. $0.09/shr

* Q4 adj. EPS $0.36 vs est. $0.25

* Q4 revenue down 10 pct to $2.02 bln

* Shares rise as much as 8 pct to 3-week high

By Swetha Gopinath

Jan 29 (Reuters) - Coal miner Peabody Energy Corp said it will lower its exposure to the United States to focus on Australia, where higher prices for steel-making coal and lower production costs are expected to lift its earnings later this year.

Shares of the world's top private-sector coal miner rose 8 percent to a three-week high of $27.20 on Tuesday after the company posted a better-than-expected profit for the fourth quarter.

"We enter 2013 with a highly contracted U.S. portfolio and growing Australian volumes as we position the company to benefit when markets recover," Chief Executive Gregory Boyce said in a statement.

Peabody's acquisition of Macarthur Coal in late 2011 for nearly $5 billion helped the U.S. company expand its presence in Australia, the largest exporter of steel-making coal that sells mostly to energy-hungry Asian countries.

Australian mining accounted for about 43 percent of Peabody's $8.07 billion revenue in 2012, helping the company offset weakness in the United States, where coal is being increasingly replaced by cheaper natural gas for power generation.

Given the long-term demand for coal in Asia, Peabody is also keen on getting a foothold in Mongolia, the largest steel-making coal exporter to China.

The company's agreement to invest in the western block of the Tavan Tolgoi coal project in Mongolia was shelved in 2011 after being branded unfair by Japanese and South Korean rivals.

Many Mongolian lawmakers have also asked the government to pass legislation to limit foreign ownership of mineral deposits.

"We're still involved in discussions with the government as they begin to look at their mining laws to try to come up with a framework that makes sense on a go forward basis," Boyce said in a conference call.

A planned $3 billion initial public offering of the 7.5-billion tonne-Tavan Tolgoi coal project will not go ahead this year as originally scheduled, the chief executive of the company in charge of the deposit said last week.

BILLION-DOLLAR LOSS

Peabody forecast an adjusted loss of between 4 cents and 26 cents per share in the first quarter, against analysts' estimates of a loss of 9 cents.

The company said it expects earnings to rise as the year progresses due to its expectation of an increase in Australian volumes and pricing, as well as lower costs.

Thermal coal prices, however, remain weak, and Peabody expects U.S. revenue per-ton to fall between 5 percent and 10 percent from 2012 levels.

Benchmark thermal-coal price declined about 3 percent to close at $87.15 in the three months ended Dec. 31.

Met coal prices, on the other hand, are expected to bounce back this year on strengthening steel prices in China.

Peabody is targeting coal sales of between 230 million and 250 million tons for the year, compared with 248.5 million tons in 2012.

The company reported a loss of $1 billion, or $3.78 per share, in the fourth quarter, as it took $884 million in charges related to writing down the value of some properties.

Excluding items, profit was 36 cents per share, well ahead of analysts expectations of 25 cents per share, according to Thomson Reuters I/B/E/S.

"Q4 was a nice beat versus our estimates, driven by a strong performance of Peabody's Australian platform, where both realized prices and costs per ton came in better than we had expected," said analyst Lucas Pipes of Brean Murray & Carret.

Revenue fell about 10 percent to $2.02 billion.

Shares of the company, valued at $6.75 billion, have fallen 35 percent since touching a year-high of $38.96 in February to Monday's close.

Shares of other coal miners Arch Coal Inc and Alpha Natural Resources Inc also rose on Tuesday.