Leighton Holdings fears the early loss of a mining contract at BHP Billiton’s Peak Downs coking coal mine will cost it up to $260 million.

Leighton announced on Wednesday that the BHP Billiton Mitsubishi Alliance (BMA) had axed the contract at the Queensland mine two years before it was due to finish in 2015.

BHP and other global miners are cutting costs to deal with lower commodities prices – particularly coal – that have sent profits diving in the last year.

BMA is not closing the 40-year-old mine but has replaced Leighton with the smaller, and presumably cheaper, private company HSE Mining to remove overburden.

Leighton said it would be entitled to compensation for the early termination of the contract, which it estimated would have a maximum impact of $260 million on its order books.

Leighton shares had fallen 21.5 cents, or one per cent, to $19.875 at 1225 AEST. BHP shares were 88 cents, or 2.7 per cent, higher at $33.99.