June 30, 2017 / 2:51 AM / 2 months ago

UPDATE 1-Australia's South32 suspends operations at Appin colliery

* Gas extraction fault prompts mine closure

* Third gas-related stop-work since October

* Regulator investigating, orders mine shut until further notice (Adds updated South32 statement, regulator and analyst comment, detail of previous closures)

June 30 (Reuters) - Australian miner South32 Ltd said on Friday it has suspended operations at its Appin coal mine on the order of a government regulator due to concerns over high gas levels in the mine.

It is the third suspension at the mine since last October over gas concerns, and the regulator said the colliery would remain closed until it was satisfied that it was safe.

Appin and the neighbouring Dendrobium colliery generated A$471 million ($363 million), or about 12 percent of South32's revenue, in the first half of 2017.

South32 withdrew staff from the mine on June 28 as a precautionary measure after a fault with the mine's gas extraction system, the company said in a statement emailed to Reuters.

It later found gas levels to be within safe limits and notified the New South Wales Department of Planning and Environment.

"The regulator then issued a prohibition notice and expressed broader concern regarding the recent gas exceedance events and the operating practices of the Illawarra Metallurgical Coal operation," South32 said in a statement to the Australian Securities Exchange.

"Whilst FY17 production should remain relatively unaffected (given the timing), this suspension will likely roll into FY18," Royal Bank of Canada analyst Paul Hissey said in a research note.

South32 previously suspended operations at the mine last October, and again in May, owing to elevated gas concentrations and said in May that the stoppage would immediately hit sales because of low inventory levels.

It also cited difficulties with gas in the mine as the reason for a fall in output for the first half of 2017.

The Department said the mine was the subject of targeted regulatory attention "as a result of ongoing safety and compliance concerns" and the suspension would hold until any safety issues had been remedied.

The Dendrobium colliery is still operating, the company said. ($1 = 1.2990 Australian dollars) (Reporting by Anusha Ravindranath in Bengaluru and Tom Westbrook in Sydney; Editing by Richard Pullin)

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