Q1 2025 Peabody Energy Corp Earnings Call
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Speaker Change: Good day and welcome to Peabody Q1 2025 earnings conference call. All participants will be in lesson only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker Change: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad.
To withdraw your question, please press star, then two [inaudible]
Please note this event is being recorded.
Vic Svec: I would now like to turn the conference over to Vic Svec.
Vic Svec: Please go ahead. Well, thank you operator and good morning all. Thank you for joining today to take part in Peabody's first quarter call.
Speaker Change: Remarks today will be from Peabody's president and CEO Jim Grech, CFO , Mark Spurbeck and Chief Marketing Officer, Malcolm Roberts. Following remarks naturally, we will open up the call to questions.
Speaker Change: We do have some forward-looking information today, and you'll find our statement on forward-looking info in the release.
Speaker Change: We do encourage you to consider the risk factors referenced here, as well as those in our public filings with the SEC. And I'll now turn the call over to Jim.
Jim Grech: Thanks, Vic, and good morning, everyone. It's clear that Peabody has had an excellent start to the year. The platform demonstrated two significant attributes that I'll emphasize today.
Jim Grech: First, the balance and resiliency of our diversified global portfolio. And second, the ability of our team to manage to the market and control the controllables.
Jim Grech: I'll summarize some of our highlights before turning this call over to Malcolm Malcolm.
Jim Grech: First of all, our Peabody team did a great job of cost control in the first quarter, coming in below our expectations for both the C-Point Thermal and Met Coal Segment.
Jim Grech: and a U.S. thermal segments came in at the low end of our first quarter cost target range.
Jim Grech: Our ability to manage costs is a key driver of success at a time of cyclical market softness in the Seaborn markets.
Jim Grech: Peabody also was on budget in a head of schedule for the Centurion Mine.
with our ramp-up of production slated for early next year.
Jim Grech: I'll remind investors that this is an operation projected to have a low cost structure and among the highest realizations in the steel making coal universe.
Jim Grech: I was also privileged to take part in a White House event several weeks ago.
Jim Grech: They're the president signed executive orders to revitalize the U.S. coal industry and expand the use of coal fire generation.
Jim Grech: The orders are intended to halt the premature and ill-advised retirement of cold generation.
Jim Grech: This comes at time of rising electricity demand and concerns around generation to serve growing U.S. load for data centers, AI, and a return of American manufacturing.
Jim Grech: The secures against a backdrop where coal plant retirements have been receding and the lifespans of U.S. coal plants continue to be extended.
Jim Grech: Last quarter, I quoted the coal plant requirements that were deferred at 26 gigawatts [inaudible]
Jim Grech: in a National Mining Association now tallys 35 gigawatts of deferrals.
That's on a total install base of 172 gigawatts.
Jim Grech: In 2024, the existing coal fleet only ran at 42% utilization compared with 72% at their historic levels [inaudible]
Jim Grech: So coal plants can shoulder a heavier load of meeting US generation demands, including multiple years of data center growth.
That's why our position is aligned with the administrations [inaudible]
Jim Grech: We believe that all coal power generators need to defer U.S. coal plant retirements as a situation on the ground has clearly changed.
Jim Grech: We believe generators should unretire coal plants that have recently been mothballed [inaudible]
Jim Grech: And the last point to US-generating fleet has clearly run at higher capacity factors since the first of the year.
Jim Grech: with coal fuel generation up a stunning 20% over the prior year.
Jim Grech: is clear that coal took market share from higher price natural gas and other energy
Jim Grech: Additionally, colder than average winter temperatures in early 2025 led to increased heating demands, elevating cold consumption.
Speaker Change: I will note that no sooner was the ink dry and the executive orders than we received a call from the utility that we currently provide coal to. They were asking about our ability to supply coal on an extended basis for a major power plant. It was on the drawing board for early closure.
And just a week later, Closer to Home.
Speaker Change: We signed an agreement with Associated Electric Cooperative to supply coal requirements for two plants in Missouri. This agreement is expected to total more than 50 million tons of our premium powder river base in coal.
Speaker Change: That would be 7 to 8 million tons per year for a minimum of 7 years.
I'll make a few points about this type of agreement.
Speaker Change: First of all, for those who continue to predict the demise of coal, we continue to see substantial US coal demand many years into the future.
Speaker Change: Second, rural electric co-ops like associated tend to be very close to their end customers. Their boards are off made up of ranchers, farmers and business people who rely on abundant, reliable and affordable power.
Speaker Change: And finally, Missouri faces some of the same new challenges of rising electricity demand that most states are grappling with.
Speaker Change: Missouri officials have raised alarms that they may not have the power to supply their expected load growth, even before new data centers come to the state.
Speaker Change: We're aware of other Midwestern states that join some coastal regions and needing to turn away economic growth opportunities since they can't promise a reliable power supply needed to meet this potential new demand that simply shouldn't be happening in the United States in 2025.
Speaker Change: It can be directly linked to the short-sighted rush in some states to replace reliable and affordable power sources with weather-dependent heavily subsidized intermittent power sources.
Speaker Change: I'll note that we are also seeing multiple states pass legislation that bolsters coal fuel the electricity.
Speaker Change: These laws often require that any existing power generation replacements be online before coal plants potentially retire.
Speaker Change: and they also mandate that these energy forms be reliably dispatchable. That's something of whether dependent, intermittent power sources such as wind and solar for all our benefits lack.
Speaker Change: As a large issue of co-supplier, it's worth noting that it has been sometimes since we've seen policy trends and supplied demand fundamentals both move in the right direction.
The deeds are exactly the current market dynamics.
That's a brief summary of highlights from recent months.
Speaker Change: I'll now turn to an update on Peabody's acquisition of premium steel-making coal mines in Australia from Anglo-American.
Speaker Change: Yesterday, we notified Angelo of a material adverse change that impacted Peabody's planned acquisition of the steel-making coal assets from Angelo.
Speaker Change: The material adverse change notice relates to issues involving the mourn by North Mine, which, as you may know, remains inactive, following what was described as a gas ignition event march.
Speaker Change: While we have been nearing completion of the steps necessary to complete the acquisition,
Speaker Change: The issue that Warren Brunn North have created significant uncertainty around the acquisition.
Speaker Change: A substantial share of the acquisition value was associated with Moran Benoris.
Speaker Change: A number of facts have brought us now to our position that a material adverse change has occurred.
I'll share several examples.
Speaker Change: First standing here today, there is no known timetable for resuming long-law production.
Speaker Change: Second, we understand that workers had re-entered the mind to conduct safety inspections only.
Speaker Change: Third, the Queensland Mining Union Safety Representative has stated in the media that he believes it will take a year or year is to resume on-wall production.
Speaker Change: Fourth, in conjunction with this incident, the Queensland Government has called for a sweeping review into coal mining safety.
which we expect is further delay of return to mining.
And finally, [inaudible]
Speaker Change: Peabody's own experience is that recovery from mind ignitions can take longer, oftentimes much longer than originally contemplated.
Speaker Change: Under the company's acquisition agreements, if the material adverse change notice is not resolved to Peabody's satisfaction,
Speaker Change: and done so in the limited time frame specified in the agreements.
and Peabody may elect to terminate the agreements.
Speaker Change: We obviously will keep the market a prize of major developments here.
Speaker Change: Malcolm, I'll turn the call over to you to discuss global market fundamentals in more detail.
Malcolm Roberts: Thanks Jim, and I'll add a few details to your comments regarding U.S. dynamics before turning to
Malcolm Roberts: There's no question that the strong start to U.S. generation has drawn down stockpiles of both minds and customers. We estimate that U.S. generator inventories have declined by more than 25% on a day's burn basis since the beginning of the year.
Malcolm Roberts: Well, US co-production declined 6%, which is a strong market fundamental as the year progresses.
Malcolm Roberts: Here to date we have seen good interest in increased volumes as well as near maximums being taken under requirements contracts where we agree to supply all the coal a plant may need.
Malcolm Roberts: Turning to Seaborne Thermal Coal Thermal Coal markets have been well-supplied following a weak winter in Asia that both Trimback demand and provided a backdrop for production. As a result, Thermal Coal process reached four yellows in March.
Malcolm Roberts: Had sub-$100 in local prices for high energy products, we've begun to see some production rationalisation that can only be expected to accelerate the longer the thermal core prices
Malcolm Roberts: The demand story for thermal coal remains intact with 600 giga-worn of coal fuel generation under construction or in various stages of development, most of which is in Asia.
Malcolm Roberts: for every coal plant retarded the US over the last decade, more than three plants have switched on in China and India.
Malcolm Roberts: Within sea-borne biological coal markets, the beginning of the year has been weak. As China has continued to increase steel exports and experience soft domestic demand. When revealing current met pricing, one true axiom is that one cannot predict future prices.
Malcolm Roberts: But as we look through past cycles, there are certain elements that need to be in place before our market improvement. We see many of those elements today. The average five-year benchmark price is $80 above mass spot levels.
Malcolm Roberts: and at our lowest mark in nearly four years. We estimate that more than a hundred million metric tons of seaborn medical production are under water at large spot prices, representing some thirty percent of total seaborn medical supply.
Malcolm Roberts: This suggests supply will come out of the market and support a recovery in prices.
Malcolm Roberts: Almost on cue, we've seen prices rebound modestly from the March low.
and we'll see what traction that gains.
Malcolm Roberts: We do note that supply has begun to look increasingly challenged with economics, wet weather in supply regions and unscheduled production averages all combining to result in a much total market where we said today that where the market was at the end of March.
Finally, a word on tariffs.
while the ultimate impact of tariffs.
Malcolm Roberts: May be most felt in an easing of global GDP. We remain optimistic this will be a temporary phenomenon.
Malcolm Roberts: I would like to point out that China and tariffs have proven to be an immaterial issue for Peabody, as less than half a percent of Peabody's volumes were flowing from the US to China.
Malcolm Roberts: This small volume is now being placed in other markets. And of course, we input no coal into the US.
Mark Spurbeck: That's a brief review of call market dynamics on out and over to Mark.
Mark Spurbeck: Thanks, Malcolm, and good morning. I would like to echo Jim's comments on our strong start to the year, and add a bit more insight on the financial results.
Mark Spurbeck: In the first quarter, we recorded net income, attributable to common stockholders of 34 million or 27 cents per deluded share, and adjusted EBITDA of 144 million.
Mark Spurbeck: Favorable cost performance across all segments, and better than anticipated volume from the Seaborn Thermo platform, drove strong EBITR results.
Mark Spurbeck: We generated 30 million in free cash flow net of 47 million of continued development at Centurion.
Mark Spurbeck: From a balance-y perspective, at March 31st, we held nearly 700 million of cash and had over 1 billion of liquidity.
Mark Spurbeck: Our reclamation obligations remain fully funded and we continued our cash positive net debt position.
Mark Spurbeck: and we again declared a seven and a half cent per share dividend.
Let's now review segment results.
Mark Spurbeck: The Seaworn Thermal Segment recorded 84 million of adjusted EBITDA in 32% margins.
Mark Spurbeck: Wilpen Young exceeded production forecasts, exporting, and additional 400,000 tons, and the segment achieved average cost per tonne, six dollars below, first quarter guidance.
Mark Spurbeck: The Seaborn Thermal Platform continues to deliver high margins throughout the cycle. Over the last three years, adjusted EBITDA has outpaced capital expenditures by a 9-1 margin, driving nearly 1.5 billion in cash flow.
The seaborn metallurgical segment reported 13 million of adjusted ebid
Mark Spurbeck: with Lagging Market Conditions. We slowed the return from a long wall move at Shul Creek and increased stockpiles, resulting in sales modestly below company targets.
Mark Spurbeck: The team did a good job of raining in cost here as well, achieving $12 per ton better than expected.
Mark Spurbeck: The US Thermal Minds generated $69 million of adjusted EBITDA in the first quarter [inaudible]
This business epitomizes stable cash flows and low capital reinvestment.
Mark Spurbeck: 2025 Business is fully contracted at planned production levels and meaningful pieces of 2026 and 2027 are already in the books.
Mark Spurbeck: The PRB mine's exceeded expectations for the quarter by shipping 19.6 million tons given the sharp increase in coal-fueled generation that Jim noted.
Mark Spurbeck: With the strong start to 2025, the company anticipates increasing demand throughout the year.
Mark Spurbeck: The other U.S. thermal mines delivered 33 million of adjusted EBITDA.
Mark Spurbeck: Sales were modestly less than expected as the company replenished stockpiles following a long, long, move at 20 mile.
Mark Spurbeck: Compared to the previous quarter, cost per tonne were down 6% and at the low end of company expectations.
Looking ahead to the second quarter [inaudible]
Mark Spurbeck: C-born thermal volumes are expected to be 4 million tons, including two and a half million
Mark Spurbeck: 800,000 of which are priced on average at $77 per ton, while 1,000,000 tons of Newcastle product and 700,000 tons of high-ash product are unpriced.
Mark Spurbeck: Costs per ton are expected to be between $45.50 per ton, more in line with full-year guidance after first quarter's outstanding performance.
Seaboard Met Lions are expected to be 2.2 million tons
Mark Spurbeck: A significant increase from Q1 results is both Show Creek and the Capabella Morvel joint venture returned to full-year production run rates.
Mark Spurbeck: Costs are expected to be between $120 and $130 per tonne as we have a long-well-movement metropolitan and we continue to reconfigure Capabella for long-term success.
Mark Spurbeck: In the PRB, we expect to ship 19 million tons, slightly lower than last quarter, as we enter the traditional shoulder season.
Speaker Change: Costs are especially to be up modestly for the quarter in the range of $1250 to $13 per ton, due to lower anticipated shipments
Speaker Change: The other US thermal coal shipments are expected to increase over the first quarter to 3.3 million tons.
20-mile returns to normal production levels.
Speaker Change: Costs are anticipated to be between $41.45 per tonne, a little better than the first quarter and higher anticipated volume.
Speaker Change: In summary, we delivered a strong first quarter, remained laser focused on cost containment in a price environment and achieved development rates ahead of plan at Centurion.
Speaker Change: Together with the second quarter, we expect to be right on plan through the first half of 2025 in position for an even stronger second half of the year.
Jim, I'll now turn the call back to you.
Jim Grech: Thanks, Mark. I'll conclude by saying, I trust what you have seen here today is what I see every day when I look at Peabody.
Speaker Change: A business that is very well situated against the macro trends moving through the system.
Speaker Change: Report photo that is well positioned and improving in its ability to maximize margins and generate substantial cash flows.
Speaker Change: And a leader in our industry with our large-scale, broad diversification [inaudible]
Speaker Change: Superior Quality Product Mix, and Long-Lived Asset Base that will be working to create increasing shareholder value for decades to come.
Speaker Change: In total, a company I'm extremely proud to be part of, and one you can be proud to be associated with.
Operator, we can now open up the line of questions.
We will now begin the question and answer session.
Speaker Change: To ask a question, you may press star then one on your telephone keypad.
Mark Spurbeck, if you are using a speakerphone.
Please pick up your handset before pressing the keys.
Speaker Change: If at any time your question has been addressed and you would like to withdraw your question, please press star, then two.
and Mark Spurbeck.
Speaker Change: At this time, we will pause momentarily to a similar roster to a similar roster.
Speaker Change: Our first question comes from Nick Giles from B.I.D. Securities, please go ahead.
Nick Giles: Thank you, operator. Good morning, everyone. Guys, I first want to say a nice job on the quarter here.
Nick Giles: You know, I can appreciate these things take longer. Is there a view that the mind could be at risk of being permanently sealed, or is it a matter of taking longer than currently outlined? Thank you very much.
Speaker Change: Hey Nick, thanks for joining us on the call and as he said, we got off to a really good start for the year, very proud of what the company has accomplished in the first quarter.
Speaker Change: and setting us up for the rest of the year. I think, yes, two different questions there. One is on the timing and then I think the second was you know about the the Mac itself and and. Yeah.
Speaker Change: So on the first one, on the timing, there's a 10-day period which ANGL has to formally respond back to us on the MAC itself.
Speaker Change: and how they intend to go forward. And then after that, it could be up to 90 days or less to work through a cure period.
Speaker Change: So it sort of sets the boundaries there of where we're at on timing and there's quite a few variables in there that could affect the 90 days to make it a shorter period but that would be the outermost length of time to
To try to agree on some type of cure
Speaker Change: I will say that, you know, we said there, there was, you know, I cited some variables in my comments. And, you know, we are under NDA, so there's only so much information that we can put out there. I will say though that we have employed quite a few technical experts consultants. [inaudible]
Speaker Change: Plus our own internal team and if we went through a very rigorous analysis of the situation.
Speaker Change: and its potential impacts, and we view them to be, have the potential to be very, very significant.
Speaker Change: So, you know, in elaborating on the comments that I made just a few moments ago, you know, as we stand here today
There is no known timetable.
for resuming long-walt production sustainably.
Speaker Change: It's just not known, and it isn't even known if the current long wall will ever run again.
Speaker Change: that is not known at this point in time. Our own experience has been from my Ignitions. The timelines can take long or even longer than you anticipated and in our experience, unfortunately, had us sealing in a long while.
Speaker Change: We also understand, as I noted, that the workers have not yet re-entered the mind to do any production work.
Speaker Change: Only to do inspections. So we're getting on 40 days here now.
Speaker Change: Where no work other than inspections, no production work has been done in that mine.
Speaker Change: So to have a timeline that says from when the ignition occurred to along while running sustainably in three to four months
Speaker Change: To us, it does not seem reasonable, and is, again, part of the data that we've used to
to resume long-aw production.
Speaker Change: So again, based on a lot of data that we didn't cover and the facts that I've just talked about in a very rigorous, rigorous technical analysis and economic analysis.
Speaker Change: We feel very comfortable with the Mac notice that we've given to Angle.
been triggered, you didn't.
Note in the release yesterday that Peabody may...
Speaker Change: Select to terminate the agreement. If the MAC is not resolved and maybe just a clarifying question on your comments there, should we assume that this resolution would be?
Speaker Change: Not only a resumption of long wall mining but a sustained resolution, sustained long wall mining and so to you what does that look like? Is there a target level of production in mind? Just any more color around that would be helpful. So.
Nick Giles: I'm not going to get into too many details here. I don't want to get into negotiations on our earnings call.
Nick Giles: But I'll just say that, you know, we need to see a sustainable, long wall production, a long wall that has up and running wealth for a period of time. And so, I just like to leave it at that. And we'll see where that takes us, if anywhere, in future discussions.
Speaker Change: Hey Fair enough, and then more if I could. I mean, how should we think about the permanent financing processes, these issues that more in the North play out? Should we assume those discussions are on hold or any color you could share around that?
Good morning, Nick. It's Mark. Yeah, with regard to financing...
Speaker Change: We have kicked off our marketing and wallcross nearly 50 firms, very strong interest in underwriting the transaction.
Speaker Change: Large support. Unfortunately, when we were scheduled to kick off our management discussions and meetings with these investors, the event happened the very same day.
Speaker Change: We held those conversations, but it's clear now that with all of the certainty around Mormbon North, and as Jim mentioned, this most significant piece of the transaction, investors much like us.
Speaker Change: Aren't willing to underwrite that uncertainty. So, until further clarity is noted, our financing is unhold.
Speaker Change: Guys, again, I really appreciate all the comments, so continued best of luck.
Thanks. Thanks.
Thank you.
Speaker Change: Your next question comes from Chris LaFemina from Jeffries, please go ahead
Chris LaFemmina: Hey guys, thanks for taking my questions. I have a few questions related to the Anglo deal.
The first is just on the Mac itself.
Chris LaFemmina: I mean, Moemba North has a history of gas related to safety stoppages, and Anglo it always talked about, you know, the risk for the mine had granted stability issues, and again high levels of gas, and they've had incidence in the past, and you know, obviously this one seems to be a little bit more. [inaudible]
Chris LaFemmina: Severe, but it's not really that inconsistent with what we've seen historically in this aspect. So the first question is what's different about this event that makes it a materialized exchange versus what we've seen historically in this mind. [inaudible]
Thank you. Thank you. Thank you.
Speaker Change: You know Chris again I'm not going to start getting into you know past events versus this event. I'm just going to comment on our belief under our agreements with angle that this constitutes a Mac from from from where we sit today.
Speaker Change: And again, on the points I just made in responding to Nick, we feel very, very confident in our approach and the claim that we've made based on the data that we've done with this incident.
Speaker Change: Okay, thanks. And then secondly, on timing, so the angle has a 90-day response period.
Speaker Change: to present a MACure, and if it's fierce out of fashion obviously the deal can still go forward and if it's not, if we assume that there's some progress.
Speaker Change: What has to happen for the long-stop date extension to kick in? So because I mean, I think there's two different
Speaker Change: Extension Options, which it actually take us to to early next year and middle and next year. And, you know, the more time that we have, the more likely it is this mine can actually come back online.
agree with the request for a long-stop
Speaker Change: Extension, in order for that to actually happen or just angle up to prove that there's progress and there's an arbitrator that decides on that, how does that work?
Speaker Change: Chris, you got a lot of questions, there are a lot of different points in there. And again, for the process that we have here with the Mac.
Speaker Change: They have ten days to respond how they wish to go forward or not and if we're going to try to cure it could be up to 90 days to work through that process. And I'll just say again we have to be satisfied with the cure to accept it.
Speaker Change: And if not, we do have the option to proceed with determination.
Speaker Change: So, the long-stop date in which you're talking about, I think, has to, you know, is to, again, not trying to get into this too much but I think that's referring to the closing process of the sale and that's a different process so don't get to two of them intertwined with each other.
Speaker Change: Okay, got it. And then finally, just in terms of different possibilities here, I mean, you know, if we assume that this mind comes back online, what then the deal will close, if the mind is permanent. [inaudible]
Speaker Change: I would think would trigger clearly a Mac. But what if there's a kind of a scenario where there's a timeline but the timeline is relatively long? And would you consider various different structures around the deal? So for example, in the initial transaction you have these contingent
Speaker Change: Deferred payments on a grove and a restart. Is that the kind of thing to consider from Warren by North as well? I mean, is it really around structure and price and you still want to get the deal done? If you're confident that this mine can come back online, even if you do have the option to walk away from the deal because of the mech?
I'm not sure if I asked that question well, but...
Speaker Change: You asked it well, Chris, but I'm just not going to get into speculation on different.
Speaker Change: Structures, how this can, you know, be solved going forward, you know, we'll get into those discussions with angle. I'm looking forward hopefully to getting into those constructive discussions with angle. I will just say that whatever however we go forward, there just has to be a recognition that there is a significant value impact. So, let's go ahead and see what we can do.
Speaker Change: and Warren Bernard, because of this situation. And again, a pathway to sustainable, long-walt performance is a key thing that we'll be looking for.
Got it. Thanks, guys. Good luck.
So, Katja, there's no-
Speaker Change: Now the Centurion process we have been exploring and continue to explore a potential partial sale.
We've had a very, very robust response to that.
Speaker Change: But, you know, we're still real early in the processes of deciding whether we want to proceed or not.
Speaker Change: on that. It's still early days on that. But again, I'll make it very clear there is no correlation between any potential sale of any aspect of Centurion and the angle process.
Speaker Change: Okay, that's good. Thank you. And then maybe focusing a little bit on the cost, obviously a very good quarter on the cost side. But then when I look at second quarter guide,
Speaker Change: Can you talk about why we're going back to more annualized numbers? What are some of the puts and takes that really drove the first quarter cost down and these that potentially are not repeating in second quarter?
Good morning, Katja. Yeah, a couple of things to note.
Speaker Change: First quarter performance is absolutely outstanding and wanted to thank all of our mind general managers and operations leadership for really turning in a strong performance in first quarter. Laser focused on costs, we saw a reduction in overtime shifts and contractors and improved productivity. So, really off to a great start to 2025.
Speaker Change: Now we continue to reset Coppabella for long-term consistency and success
Speaker Change: For the full year, we're going to move about additional 6 million BCMs, which is expected to increase segment cost nearly $5 a ton for the full year. We got a good start to that in first quarter, but less than rateable, so we're expecting more of that in the second quarter.
Speaker Change: So you can see that right now we're definitely trending toward the low end of some of those cost expenses for the year. I do see upside in Seaborne Met costs. I do see upside in Seaborne Thermal Costs.
Speaker Change: and as Jim noted and as well in the remarks, I see upside in PRB volumes going forward with strong demand and the strong starts 25.
Speaker Change: So, you know, we've had a really good start to the year. We're one quarter into the year. We haven't changed our full-year guidance but are definitely trending in the right direction [inaudible]
Thank you.
You're welcome.
Speaker Change: Thank you. Your next question comes from Nathan Martin from the Benchmark Company, please go ahead.
Thanks operator, good morning everyone, congrats on the quarter [inaudible]
Nathan Martin: I'm going to come to the show creek mine for a second. You guys mentioned the slower restart of the long wall there.
Nathan Martin: to the market conditions. Is this just a lack of demand, low price, maybe a combination of both? And then, you know, with met costs in the first quarter, well below guidance, I mean, Mark, you just highlighted some of the items there even on fewer shipments.
Nathan Martin: Did the delayed restarital creek have anything to do with that? That help? How should we think about that mine going forward this year?
Please look.
Nathan Martin: and the spot market dropped on a short basis, potential for high-volt product very close to two figures.
Nathan Martin: We were seeing others do deals at those types of levels and we decided the holds of volume back. So to give you an idea, we held back about 170,000 tonnes of sales, otherwise we would have planned to have made.
and the likes, so we've got through that. [inaudible]
but it was prudent to, um...
Nathan Martin: to hold off the restart of the Long World because we wanted to be sure that we had the product placed for the next quarter.
Nathan Martin: and you know, you don't want to stop along once you've started it. So that was really what we did there. I think that might have held costs, but Mark might be able to help you a little bit with that. Yeah, sure, Nate. Soul Creek did not help.
Mark Spurbeck, James Grech, Malcolm Roberts, Vic Svec
Speaker Change: Okay, that's helpful. Just made me to follow up there. I mean, Blacks, I think Haval A index is around $176 of a metric ton today. If we look at the net back there, Malcolm, what does that look like, are you guys still making a margin? It sounds like you should face on Mark's comment that it's one of your lower costs.
Speaker Change: Yeah, look, this will be the third quarter that I talked to this issue. And, you know, the issue is that there's a
Speaker Change: and you know the freight on that is somewhere between 30 to 35 dollars so that gives you an idea on a metric basis what the netback would be
That would be how I see it.
Speaker Change: Okay, appreciate that. And then shifting over to the C-borne Thermal Segment, obviously strong quarter there in the first quarter, 4.4 million tons, sales above your original guidance.
It's like two cute guys, it's just four million tons so-
Speaker Change: Let me put you guys at what 8.4 million tons in the first half, which we annualize as well above the high end of full year guidance.
Speaker Change: Nate, a couple of things. First, remember that the Wombo Underground Mine is coming offline mid-year end of production there. So we won't see any production in the second half of the year from the Wombo Underground.
Speaker Change: for that segment. I'd also say Wilpen Young had a very, very strong first quarters. We noted an additional 400,000 tons above expectations. That will not repeat itself. So pull that out and you're looking at a lower production from Wilpen Young in the second half of the year as well.
Speaker Change: Got it, Mark. Thanks for that reminder. And then maybe finally, Jim.
Jim Grech: You mentioned you were attending the signing of the Executive Waters and that supporting US co-production and...
Jim Grech: Co-Fired Power Generation. You call that a couple items, but maybe it would be great to get some additional thoughts on how you think some of these should impact your business, whether it's federal leasing or to your waivers from maths or any other potential changes. Thanks.
Jim Grech: of reserves. There are some decreases in royalties which would be occurring. That would be certainly helpful to us, but our position is really strong and our lease is out west or in the Midwest with the reserves we control as well. I think the most impactful
Jim Grech: There's a lot of changes, a lot of regulations, it's sort of dizzying when you look at everything the EPA tried to...
Jim Grech: Do over the past years to damage coal fire generation and to undo that.
Jim Grech: We can talk for hours about all of the things that have to be done and I will say that to the executive orders and the meetings that we've had with the EPA, with the DOE and the DOI, they're focused on all of those items.
Jim Grech: But, you know, if I had to give you one specific thing, Nathan, you know, the the edict to not close down any more coal plants and to look at, you know, unretiring, recently mothballed ones.
and giving that support so cold generators can feel comfortable.
Jim Grech: to keep the plants open and to start contracting out for those plants. And I give the...
Jim Grech: One example I'll say is generic because we've had more than one of coal consumers contacting our marketing team to now start supplying them coal again or for longer terms when they thought those plants were going to be shut down.
Jim Grech: and of course the Associated Contract, which we have been working on sometime as they are very committed to their cold generation and a long-term relationship with us, but to enter into that seven-year agreement for the substantial tons is what we're seeing is, again, much more interest.
Jim Grech: to enter in the term agreements. And I'll tie both of those together that relates to Peabody. You know, if now you fear a coal consumer and you want to make sure you have a reliable supply of coal for your plant for many years, you want to go to a low-cost producer or producer that has...
Jim Grech: Reserves to back up these long-term commitments and our US assets, you know, check all those boxes for our customers.
Jim Grech: Very helpful, Jim, I'll leave it there, appreciate the time, gentlemen, and best of luck.
Thank you, Nate.
Thank you.
Speaker Change: The next follow-up question comes from Nick Giles from B. Riley Securities. Please go ahead.
Nick Giles: Thanks for taking my follow up. Nate asked it well, so I'll turn to the agreement with Associated, which is...
Nick Giles: Nice to see, maybe just to ask it in a different way, you know, does this agreement change the way you're thinking about deploying capital in the PRB or at your other US thermal minds? And then is there any color around pricing and margin that you can provide? I'm not sure we've...
Nick Giles: Seen the agreement flowed through to PRB spot prices but obviously this could be impacting
Yeah, so...
You know Nick, I think Mark made the points [inaudible]
and we've made them at other times that… [inaudible]
are U.S. assets.
Nick Giles: A very, very little couple for the amount of cash that they generate . . .
Nick Giles: and we've always invested in them with the expectation that those minds are going to be running.
Nick Giles: for the life of their reserves. So we've never shortchanged the capital on them.
and that's part of the...
Nick Giles: The commitment we've made to our customers that, you know, while other coal companies may be wavering or other coal generation plants may be looking to shut down. We're going to be here for you. You can count on us and we're investing to be here for you, so it doesn't change at all what we're doing with our capital investment. We're going to be here for you.
Nick Giles: or Maintenance because we've always been situating ourselves to be here for the long term and to have very good margins. Now I think the second part of your question, if I was trying to understand Nick, were you asking specifically about the pricing mechanisms in the associated contract? Was that what you were asking about? [inaudible]
The Courage of the New General are both both.
Speaker Change: Yeah, Nick, I just say that in the, you know, it gets in the confidential nature of the contract. I'm not sure we're really free to be talking about the pricing mechanisms with the net contract. But if you want to talk about.
Speaker Change: Yeah, I guess all I'll say on it is it's market-based. I'll just leave it at that.
Speaker Change: if that's helpful, Nick. And I won't go any further than that.
Speaker Change: And if you're talking about our other the rest of our portfolio and the margins and the contracting, I think I'll just refer back to what we have in the guidance. Maybe as best to answer that because it's sort of a broad question. If there's something more specific, we'll be happy to follow up with you on that, but they give you enough of what you're looking for.
Speaker Change: That's enough. I guess maybe, you know, asking a different way, you know, as you're still generating a healthy margin in the PRB and so, you know, what should give us the confidence that we can underwrite a margin like this into the long-term, especially as PRB volumes could decline.
Well...
Speaker Change: I think you can expect to see us that going forward with that. So on the cross side, the basis of our ears, how we've historically performed, I think should give you all the confidence in the world.
A Product of Supply and Demand
Speaker Change: and we have the best reserve position in the basin, we have the lowest cost reserve position in the basement so you know whether other other producers are here for the time that we can be here I'll leave that up to somebody else to comment on but we feel very very good. Good.
Speaker Change: about our position compared to other companies and the demand side for all the things we talked about has a lot of tailwinds behind it.
Speaker Change: So you know at today's prices or stronger prices our costs are going to be very predictable and we feel very good about those margins [inaudible]
Speaker Change: Jim, that's all very helpful, and I agree that you're competitive. Advantage in the PRB is under appreciated. So if I could sneak in one more, nice to see Centurion ahead of schedule, apologies if I missed it, but what was the spend towards Centurion in Q1 and what remains in 2025?
Yeah, Nick, I'll...
I'll give that one over to Mark to respond to.
Mark Spurbeck: Sure, Jim. In the first quarter, we spent $47 million for the development of Centurion. When you're looking at the total look at that long wall into production in the Southern District, there's about 150 million left.
Got it. Appreciate it. Thank you.
Alrighty.
Speaker Change: Yeah, that's really quite an achievement. I think Nick a lot of people misappreciate that as well that we've fully funded and self-finance the entire development of Centurion. When you include the acquisition awards well, we've spent $540 million to date on that all self-financed while still continuing to provide shareholder returns and dividends. So, looking forward to getting that done, I think she'd be in long-awaited production for us quarter next year. Thank you very much.
Speaker Change: Good to hear guys, thanks again for all the color. Best of luck.
Thank you, Nick.
Speaker Change: Thank you, operator. Thank you, operator. And thanks to everyone for the time today. I also want to give recognition to our Peabody team.
Speaker Change: and our continued focus on, you know, safe low cost environmentally responsible operations. So we look forward to keeping you up to date on our progress as the year rolls on. Thank you for your time.
Thank you.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation. Human