Peabody Energy has announced it is drastically cutting the number of contractors across its Australian coal mines.

A source close to the issue told Australian Mining, the company's president Charles Meintjes states that the reduction comes as Peabody carries out a "repositioning and improvement program" to reduce its costs.

It stated that in an effort to respond to current market conditions "management has been reviewing the use of contractors across many of our mines".

"This has traditionally been an area of high spend for the company and as a result we will be reducing approximately 450 contractor positions at our mines over the coming weeks."

Peabody went on to say that it will continue with its "current repositioning program that will include initiatives such as optimising the use of external service providers and the implementation of operational improvements".

Meintjes added that "these are tough decisions and that they will have an impact on our teams, however we have to take action to reposition our cost base in these challenging market conditions".

Speaking to Australian Mining, Peabody Energy confirmed the contractor reductions across Queensland and New South Wales.

It went on to state that "Peabody Energy regrets the impact on the contractors directly affected and is conscious of the likely impacts on communities in which we operate. We are taking these steps to secure the long-term competitiveness of our operations".