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Dec. 14 (Bloomberg) -- Peabody Energy Corp., the largest U.S. coal producer, said first-quarter earnings will reach a trough because of lower U.S. sales, higher costs at Australian mines and a decline in metallurgical-coal prices.

U.S. sales will fall by about 2 million tons in the quarter compared with a year earlier as average prices drop by about 5 percent because of the expiration of higher-priced contracts, St. Louis-based Peabody said in a statement today. Australian unit costs will increase by about 10 percent in the period and the company will incur higher depreciation, depletion and amortization expenses.

Prices and demand for coal used by U.S. power stations have declined in the past two years after some utilities switched to using natural gas, which traded at a decade-low in April as production increased from shale rock. The price of metallurgical coal has declined after a slowdown in demand from Chinese steelmakers.

“While the first quarter is challenged due to a combination of factors, we expect quarter-over-quarter improvement throughout the remainder of the year,” Chairman and Chief Executive Officer Gregory H. Boyce said in the statement.

Peabody said U.S. sales volumes will be 180 million to 190 million tons next year, compared with targeted 2012 sales of 188 million to 192 million tons. Sales from its Australian mines will increase to 33 million to 36 million tons in 2013, compared with this year’s target of 31 million to 33 million tons.

Peabody rose 0.2 percent to $27.68 in New York. It has declined 16 percent this year.

To contact the reporter on this story: Sonja Elmquist in New York at

To contact the editor responsible for this story: Simon Casey at

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