Peabody Energy Corporation (NYSE:BTU) Q4 2024 Earnings Call Transcript

Peabody Energy Corporation (NYSE:BTU) Q4 2024 Earnings Call Transcript February 6, 2025

Peabody Energy Corporation misses on earnings expectations. Reported EPS is $0.3 EPS, expectations were $0.53.

Operator: Good day, and welcome to the Peabody Energy Corporation Q4 2024 earnings call. All participants will be in listen-only mode. Please note this event is being recorded. I would now like to turn the conference over to Vic Schveck. Please go ahead.

Vic Schveck: Well, thank you, operator, and good morning, everyone.

Jim Grech: Thank you all for joining today to take part in Peabody Energy Corporation’s fourth quarter conference call. Remarks today will be from Peabody Energy Corporation’s President and CEO, Jim Grech, CFO, Mark Spurbeck, and our Chief Marketing Officer, Malcolm Roberts. Following the remarks, of course, we will open up the call to questions. Now we do have some forward-looking statement information today, and you will find our statements on forward-looking info in the release. We do encourage you to consider the risk factors that we reference here along with our public filings with the SEC. And I will now turn the call over to Trudy.

Trudy: Thanks, Vic. Good morning, everyone. Peabody Energy Corporation had a strong finish to 2024, marked by a highly productive quarter that sets the foundation for multiple years of substantial growth and value creation. Consider that in the past three months, we turned in solid fourth-quarter results even in the face of some geologic and pricing challenges. Shipped the first coal to market from the Centurion mine, agreed to buy multiple premium hard coking coal mines from Anglo American, entered into an agreement with clean energy leader RWE to develop renewable energy projects on reclaimed mine lands, completed a year in which we returned $221 million to shareholders while continuing to reinvest in the business, set a new 140-plus year company record for lowest accident rates, reclaimed 70% more land than we disturbed while freeing up more than $100 million in reclamation bonding obligations, and again, achieved the top rating for governance by ratings firm ISS.

We know of no other coal company that can cite that record of recent positive momentum. And while it is an impressive list, by no means can we say that we are hitting on all cylinders yet.

Jim Grech: Case in point, keyboard and my coal prices are up 45% in the past year as we move through the low ups of the cycle, expectations of improvement later in the year. US coal demand has not yet caught the uplift that can be expected from growing domestic power demand, which we believe will occur over time. And we have worked through geologic challenges at our Twenty Mile mine with increased production just now taking hold. I will spend a moment updating you on our major actions to transform Peabody Energy Corporation into a company focused on serving growing met coal demands at Asian steel mills. Late in the quarter, Peabody Energy Corporation shipped its first coal from the Centurion mine to a Southeast Asian steel mill.

We now have four continuous miners in coal in Centurion’s Southern District and expect two continuous miners to enter coal in the Northern District in the third quarter. For 2025, we are looking at half a million tons of development coal from Centurion, ahead of a projected 3.5 million tons in 2026, when longwall production in the Southern District begins. I am also pleased to report that Peabody Energy Corporation’s planned acquisition of premium hard coking coal mines in Australia from Anglo American is progressing well. Since signing the agreement, we have been active on a number of fronts. We have received regulatory approvals from several jurisdictions, advanced the contractual preemption process, started the permanent financing process, and have begun in-depth integration planning.

We are now targeting completion of the acquisition next quarter, obviously subject to clearing the closing conditions. I will remind investors of the many strategic and financial aspects that make this transaction so appealing. First of all, this positions Peabody Energy Corporation as a leading seaborne met coal fire. On a pro forma basis, we expect three-fourths of Peabody Energy Corporation’s EBITDA in 2026 to come from metallurgical coal. This is also an acquisition that we believe is accretive to cash flows across all periods. The transaction boosts both coke and coke quality, improving realizations and mine lives with averages of more than 20 years. Geographically, we will have the logistics advantage of having most of our met coal production and sales in the Pacific Rim.

As global steel production continues to shift to Asia, we are highly confident that there are some $100 million a year in synergies to be captured post-acquisition. Finally, we believe that the strong cash flows of the acquired assets will accommodate continued shareholder returns and lead to a favorable rerating of the stock. From the acquired mines, we are projecting 11.3 million tons of saleable production in our first full year of ownership in 2026. Since our November announcement, our confidence in those numbers has only grown. For example, a number of operational improvements are being implemented by Anglo, and as we speak, the new longwall at Morinby North is being ordered. In a moment, I will turn the call over to Malcolm Roberts, our Chief Marketing Officer, to talk through the global coal markets.

As a lead-in, I would note that the US is experiencing the strongest confluence of policy and commercial tailwinds that we have seen in more than two decades. Consider these facts. First of all, after some 15 years of flat electricity load growth in the US, utility experts and industry observers are now expecting 2% to 3% annual load growth in coming years due to data centers and increased electrification. Second, following multiple years of premature retirements in coal-fueled generation, we have now seen deferrals in retirement plans extending the life of 51 coal units in 17 states, constituting 26 gigawatts of power, and up to power 20 million homes. Third, we have a new administration that is vocally pro-coal and is already taking steps to facilitate common-sense policies to assist our utility customers while also encouraging greater exports of LNG to Europe.

Fourth, we are seeing a favorable environment to increase utilization of existing coal plants, which ran at 72% of capacity on average early last decade but most recently were only averaging 42% utilization. And finally, we have new entrants into merchant power generation and look to change up the dynamics of recent years. Peabody Energy Corporation itself has been approached by household name private equity funds that are looking for creative means to match up reliable low-cost coal plants with growing data center needs or backfill generation to feed a capacity-hungry grid. Having covered US markets, Malcolm, I will ask you to complete the discussion with seaborne supply-demand dynamics.

Malcolm Roberts: Thanks, Jim. You have given a good overview of US policy and market trends. Those trends, along with strong winter weather, have drawn down stockpiles in our mines and at our customers. US thermal coal production is largely spoken for during the first half of the year, and we expect to see our customer base come to market for additional volumes as the year progresses. In our discussions with customers, they are anecdotally confirming that the narrative of data centers driving electricity demand growth is real. Now I will turn to what we are seeing in global seaborne markets, starting with met. Near-term seaborne met markets remain well supplied as the Chinese domestic economy remains soft. China’s apparent steel consumption declined by approximately 5% in 2024 to just under 900 million tons, leading to net steel exports to increase by 30% to the highest level since 2015.

Another way of viewing steel from our perspective is its refined metallurgical coal, so China’s strong steel exports translated into otherwise weaker met coal demand elsewhere. Steel production outside of China has remained largely steady as a result of growth in India. However, margins have become challenged. Like most observers, we do not view China as the growth engine for coal demand growth over time, though. That role is likely to be played by India, and in 2025, we expect an 8% increase in Indian steel production underwritten by several new blast furnaces coming online. From a supply perspective, we are seeing some tightness in the premium low-volatile PCI segment. In the coking coal segment, there have been notable disruptions in high-volatile coking coal production, including mine fires and bankruptcies.

That is partially offsetting some of the easing of demand from Atlantic buyers. Longer-term, we anticipate the demand and supply fundamentals to drive increasing price spreads between premium hard coking coals and lesser grades. Of course, this is a thesis underpinning the development of the Centurion mine and our premium hard coking coal acquisition. Turning to seaborne thermal markets, to wrap up 2024, China increased total coal imports to 543 million metric tons, a 14.4% increase from 2023. China’s imports of Australian coal increased by over 50% during the same period. The increase in Chinese imports was the key contributor to global seaborne demand growth during 2024. Within the global seaborne thermal market, we have seen a mix in the Northern Hemisphere, colder weather in the Atlantic, and warmer winter weather in Asia.

Recent demand for imports has been mixed, with stockpiles in jurisdictions such as China and India higher than normal. Attention is now turning to industrial activity following Lunar New Year breaks in China and Asia more generally in the coming weeks. As the year progresses, we will see how Europe restocking of natural gas may influence LNG pricing and the relative competitiveness of Australian high-energy coal. We will also observe how recently announced trade tariffs influence seaborne trade flows, as the relative price competitiveness of US coal exports to China are likely impacted. That is a brief review of the coal market dynamics. I will leave it there for now and welcome the opportunity to provide further details in Q&A. And now I will turn the call over to Mark.

Mark Spurbeck: Thanks, Malcolm, and good morning. Jim noted our strong finish to the year. And I will provide some additional color. In the fourth quarter, we recorded net income attributable to common stockholders of $31 million or $0.25 per diluted share and adjusted EBITDA of $177 million. The company generated $121 million of operating cash flow from continuing operations. This contributed to a full-year net income attributable to common stockholders of $371 million and adjusted EBITDA of $872 million. The company generated $613 million of operating cash flow from continuing operations. In 2024, we returned $121 million to shareholders through share repurchases and dividends and advanced Centurion through its first coal shipment in the fourth quarter.

I would note since restarting our shareholder return program, we have returned $600 million to shareholders and invested $500 million in the development and expansion of Centurion. At December 31st, Peabody Energy Corporation had $700 million of cash and available liquidity of $1.1 billion, and our reclamation obligations remain fully funded. We believe this financial strength and balanced capital allocation will best reward our shareholders over time. Also positioned Peabody Energy Corporation for the Anglo acquisition, marking a deliberate progression in Peabody Energy Corporation’s financial and strategic transformation. Looking ahead, Peabody Energy Corporation’s capital allocation will be heavily shaped by our pending acquisition. As a reminder, we have structured the transaction with a combination of upfront, deferred, and contingent payments.

This is all designed to enable the anticipated cash flows from the acquired assets to self-fund the transaction and set up a higher baseline sustainable shareholder returns. Let’s now review the segment results. The fourth quarter, Seaborne Thermal recorded $112 million of adjusted EBITDA on margins of 36%. Tons shipped were ahead of expectations, and that was primarily due to higher than anticipated production at Wambo Underground. Seaborne thermal cost per ton remained stable with the third quarter, beating expectations. For the full year, Seaborne Thermal segment reported $430 million of adjusted EBITDA. Shipments increased nearly a million tons from 2023, and costs were down about a dollar per ton, resulting in EBITDA margins of 35%. The segment generated over $350 million of free cash flow.

The Seaborne Met segment reported $23 million of adjusted EBITDA in the fourth quarter. Shipments increased 500,000 tons compared to the third quarter, in line with expectations. Cost per ton improved a better than expected 12% due to higher than anticipated production at Shoal Creek, as well as a weaker Australian dollar. This was partly offset by lower production at Capabella. The average realized price was down about $21 per ton compared to last quarter due to a higher mix of Shoal Creek sales. We also saw benchmark prices for PCI and high vol A coals each down about $15 a ton quarter over quarter. For the full year, the Seaborne Met segment reported $243 million of adjusted EBITDA. Shipments increased 400,000 tons year over year to 7.3 million.

The segment achieved EBITDA margins of 15%, a favorable result considering that market prices pushed realizations down $44 per ton in the year. Switching to US thermal, the mines generated $93 million of adjusted EBITDA in the fourth quarter, resulting in $72 million of free cash flow. PRB mines shipped 23 million tons, well ahead of expectations. Continued operational discipline kept costs at $11.50 per ton, the same as last quarter, and that let us maintain the same 17% margins in the fourth quarter and generate $53 million of adjusted EBITDA. The other US thermal mines delivered $41 million of adjusted EBITDA. In the Midwest, shipments reached contractual agreements with certain customers to offset lower 2020 production. Production was 200,000 tons less than expected as the previously disclosed geological conditions at Twenty Mile required us to step the longwall around a rock lens.

We have turned the corner on that issue, and longwall production recently resumed, with the mindset for a strong 2025. Together, the US thermal mines produced $289 million of adjusted EBITDA in 2024 and required just $54 million of capital, resulting in $235 million of free cash flow. The last comment I will make on Q4 results relates to other operating costs. We recorded a $41 million noncash charge for the remeasurement of our Australian balance sheet at year-end due to a lower A dollar exchange rate. The weaker Australian dollar benefited operating costs throughout the quarter, providing a bit of a built-in natural hedge to earnings. But as the A dollar weakened throughout the quarter, the period-end remeasurement resulted in a significant net negative impact to Q4 EBITDA.

Looking ahead to 2025, I will briefly review guidance for the full year. You see that some analysts are including the Anglo acquisition in their 2025 estimates for Peabody Energy Corporation, but our guidance excludes contributions until the transaction is complete. This year, Seaborne thermal volumes are expected to be lower than 2024 due to reduced production at Wilpin Young and the closing of the Wambo Underground mine midyear, which will be partly offset by higher production from Llamos surface operations. Additionally, domestic cost-plus sales requirements are down another 400,000 tons in 2025, allowing us to achieve export pricing on that volume. Shipments are targeted to be 14.7 million tons, including 9.3 million export tons. Costs are projected to be consistent with 2024 levels at $47 to $52 per ton.

Seaborne metallurgical volumes are projected to increase over 1 million tons to 8.5 million, primarily due to higher volume at Shoal Creek and the continued ramp-up at Centurion. This occurs even as we work through the high wall stability challenges at Coppabella as we reconfigure the mine for an optimal long-term solution. Segment costs are targeted at $120 to $130 per ton, in line with last year. In the PRB, we are forecasting shipments between 72 and 78 million tons and currently have 71 million tons priced at $13.85. Costs are expected to remain mostly flat with 2024 levels, $12 to $12.75 per ton. Other US thermal volumes are expected to be about 14 million tons. We have 13.6 million tons priced at $52 and expect costs in the range of $43 to $47 per ton, consistent with last year.

Total capital expenditures for 2025 are estimated at $450 million, including $80 million in project capital primarily for the continued development of Centurion. In summary, we delivered on our 2024 goals and remain committed to financial discipline and growing free cash flow per share. 2025 promises to be a busy year that will be shaped by the Anglo acquisition, advancing Centurion, and US policy. For more on that, I will turn the call back to Jim.

Jim Grech: Thanks, Mark. I will turn briefly to Peabody Energy Corporation’s main focus areas for the new year. It is fair to say that we begin 2025 with an ambitious agenda. Our first focus is an every-year item, the relentless pursuit of safe, productive, and environmentally sound operations. Our second focus this year is to continue to ramp up the flagship Centurion mine on time and on budget. I am pleased to report that development is running ahead of schedule, and all systems are go for our planned longwall start-up early next year. Our third priority is to complete our premium hard coking coal acquisition, which together with Centurion will transform Peabody Energy Corporation’s product financial profile. Priority number four is to serve growing Asian thermal coal demand through our low-cost Australian export platform.

With longer-term mine extensions teed up, it is no surprise that the International Energy recently reported that last year, the world used a record amount of coal, 8.77 billion metric tons, representing more than one ton for every man, woman, and child on earth. IEA also projects that global coal use will continue to grow for the next several years. Our fifth priority is to leverage our low-cost US coal production to capitalize on emerging favorable policy and commercial themes, and that dynamic continues to unfold as we speak. And finally, we work every day to enhance long-term cash flow per share creation. While the actions we are undertaking today are enhancing our shareholder value proposition in three areas: earnings growth, sustainable shareholder returns, and multiples expansion over time.

And it is fair to say that our share price is reflecting none of the potential uplift in valuation from our recent actions. I have never been more optimistic about the prospects for Peabody Energy Corporation and look forward to seeing those positive actions translate into tangible share price appreciation as we continue to execute. Operator, we are now ready to take questions.

Operator: We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed, the first question comes from Nick Giles with B. Riley Securities. Please go ahead.

Q&A Session

Nick Giles: Thank you, operator. Good morning, everyone. Hello. My first question is around the preemption rights process. I was wondering if you could add any color around what those conversations have looked like, and I had the same question for any potential stake sale. Is there a preference for incremental stakes in the Anglo assets versus any stake at Centurion? Thank you very much.

Jim Grech: Hey, Nick. Good morning. Jim Grech here. On the preemption question, that is part of any sales process. It is a typical contract term when you have joint venture partners. It is progressing well. The timeline for the deadlines on it is sometime in mid-March. We expect that deadline to come and pass, and we will move forward with the closing of the transaction. On the asset sales, could you again ask that question again so I am sure we respond to it correctly?

Nick Giles: Yes. Thanks, Jim. That is very helpful. And just on the asset sales, I was wondering if there would be a preference for additional stakes at the Anglo assets versus one at Centurion.

Jim Grech: Nick, you know, we would, if anybody, if the discussions lead to fair value, full value offers on the asset sales, we would look at some minority sales in those assets, whether it is with the Anglo assets or Centurion. So we are anticipating that to be part of the financing process that we have here for the acquisition. And some of those steps have been undertaken already. But, you know, it is too early to call what, if any, would be the results of that.

Nick Giles: Got it. Jim, that is very helpful. Shifting gears, MET guidance of 8.5 million tons at the midpoint. I assume we are on half a million tons could come from Centurion, but how should we think about bridging from the 2024 level to 2025, and then similarly on the cost side, costs are up at the midpoint versus 2024. So how should we bridge those as well? Thank you very much.

Mark Spurbeck: Good morning, Nick, and welcome to the call. I read your note this morning, and you looked like your model was perfect. So congratulations. I think you are doing a better job than Lucas already in your first call. But, yeah, I say that tongue in cheek. I am sure Lucas is listening in. So to answer your question on Seaborne, Matt, you are right. We are up over a million tons and about four to five hundred thousand more year over year as that Centurion. Shoal Creek is also up about six hundred thousand tons. So that is the delta there. As far as costs go, we are forecasting $120 to $130, full year 2024 is $123. So pretty consistent. I would say there are two things that may lead it to be a bit higher, and that is one, I mentioned in my remarks we are resetting Capella for optimal long-term solution.

We are going to be moving more ways, about six million bank cubic meters more year over year. And do not forget, we had a pretty weak Aussie dollar as well in 2024.

Nick Giles: Mark, I appreciate all the color. To you and the team, continue best of luck. Thank you.

Operator: Next question comes from Nathan Martin with The Benchmark Company. Please go ahead.

Nathan Martin: Thanks, operator. Good morning, everyone.

Jim Grech: Good morning, Nate.

Nathan Martin: Maybe just one more question on the Anglo acquisition. You know, you guys mentioned several regulatory approvals have come already. What is left? Anything there from the standpoint that could hold you guys up beyond that targeted Q2 closing?

Jim Grech: Nate, we have had some in the restaurant process and, you know, the various international ones, and I think we have one left in Australia. Initial indications are everything is going just fine with them. And the timing in those regulatory approvals is anywhere from later in February to maybe end of March, first week of April. So, it spans that time frame. So just like with the preemptions, you know, we just have to work through the process. There is a time frame involved. We are stepping through it. And right now, everything looks good to us, Nate.

Nathan Martin: Sounds good, Jim. And then maybe coming back to the preemptions or really just minority interest sales, does your preference change at all? Or, you know, how should we think about the balance between minority interest sales and debt for the transaction?

Jim Grech: Well, I will just have a comment on the sales process, and then I will let Mark get to some of the details. But, you know, as I said, we started the beginning of looking at potential minority sales positions in the Anglo asset and Centurion. And we have had some very robust interest in the assets coming from many different sectors in the US, Australian, international. So again, I am not going to sit here and say what is going to happen because everything is in negotiation, but I will say that there has been very robust interest at the beginning here of this process.

Mark Spurbeck: Nate, not a lot has changed from when we announced the transaction and our plans for the permanent financing. The $1.7 billion upfront payment, we expect to be, you know, funded primarily with debt, you know, the lion’s share being high-yield secured notes. You know, we have talked about the project-level equity, the minority stake sales as being another key option there. And as Jim mentioned, those discussions are underway. You know, the timing as well as magnitude of those sell-downs become factors here. And then lastly, we would, you know, potentially round out with convertible notes or other financing. So not a lot has changed. I will say that that process is underway. It is going well in the early stages. There is strong inbound interest. We continue to test market capacity, and we are highly confident that we will arrange the financing along the lines we originally announced.

Nathan Martin: And Mark, any commentary around potentially needing to issue common equity? I know that is a question investors are focused on.

Mark Spurbeck: Yeah. You know, I would probably echo Jim’s comments that, you know, reflect our belief that a lot of the value in Peabody Energy Corporation and the pending acquisition are not currently reflected in our share price. Unfortunately, we do not get to pick the time when these types of assets become available. We recognize, you know, spot coal prices are down. But we did not buy these multi-decade assets for short-term changes in spot prices, which can influence the coal equities. Our number one goal remains to enhance shareholder value. And you do that by increasing free cash flow per share. We simulate free cash flow out of the acquisition, you know, our P50 case without Grosvenor results in over $800 million of free cash flow in the initial five years after all of deferred and price contingent consideration, effectively paying one half of that initial consideration off, leaving us with a very manageable permanent debt slice of the capital stack and a significantly higher free cash flow base to provide sustainable shareholder returns.

So, you know, we recognize the need to appreciate the volatility in seaborne coal prices and remain prudent to ensure financial resiliency throughout the price cycle so we can execute the strategy. You know, the coal equities have all traded down since the announcement. And we are going to take a good hard look at it. It is the last on our priority list. But we have all the tools in the kit, and we continue to assess what the market will provide.

Nathan Martin: Great. Appreciate those thoughts, guys. And then maybe just one final, but we want to leave Malcolm out. I know you touched on this briefly in your prepared remarks, but coming back to China’s new 15% tariff on US coal imports. Obviously, the bulk of Peabody Energy Corporation’s export sales come from Australia, but you know, how do you see that tariff potentially impacting your business as well as the seaborne markets in general?

Malcolm Roberts: Yeah. Look. You know, one thing with the markets is they are a little bit like a balloon. If you push some, and so, you know, US exports are getting pushed here in terms of their price competitiveness into Asia. And for us, we have got about 600,000 tons of product that went to China last year. And that would mean that if we did nothing and continued supplying to China, we would have a 15% lower price. And it really does not help when that is the clearing level and that is your alternative because other customers now, when you look to sell to them in Asia, will be looking at what that alternative is. It is positive for Australia in the sense that Australia becomes more and more competitive in Asia, which is the growth base for met coal demand.

But for us, it is probably not such a big issue. I would like not to have seen this happen. But, look, you know, the markets will readjust. Maybe there may be more product go to, US product go to India, and more Australian product go to China to balance that out. Or, you know, more US product to Europe, and less Australian product to Europe. You know, the market will work that out. But to deal with that, we need some price signals. And the price signals to make that readjustment could be a little bit painful in terms of our short credit returns over the next quarter or so. But, look, let us wait and see how it all plays out. But, hopefully, it has given you my perspective on them.

Nathan Martin: That is great. And just to clarify, Malcolm, the 600,000 tons to China, is that from Shoal Creek you are referring to specifically?

Malcolm Roberts: Yeah. That is Shoal Creek.

Nathan Martin: Okay. Got it. Appreciate the time, guys, and best of luck in 2025.

Jim Grech: Thanks, Nate.

Operator: Next question comes from Katja Janczyk with BMO Capital Markets. Please go ahead.

Katja Janczyk: Hi. Thank you for taking my question. Maybe going back to the Metco cost guide, can you talk a bit more about how much Capabella is negatively impacting costs? Because I would assume with production higher, in general, and medical prices lower, the cost should still be trending more positively or lower?

Mark Spurbeck: Gotcha. Two things. One, you know, for Q1, you know, we are guiding a little bit higher than the full year on a ratable basis, expected and anticipated at only $113. But we think that Q1, we know what will be impactful. But for the full year, we have put our guidance at $120 to $130. 2024 came in at $123. You know, as I mentioned before, it is really just moving those additional six million BCMs and the really weak A dollar throughout 2024, particularly in the back half of the year, that is driving the difference. Otherwise, we see them pretty consistent. And really, we do not see any significant inflation or other issues. So that is really the story. Does that help?

Katja Janczyk: No. No. That is helpful. Thank you. And then maybe there was some report that Dalrymple port was impacted by weather. Are you seeing any impact from that year-to-date? And are there any issues with production given the weather currently in Australia?

Malcolm Roberts: Hi, Katja. Malcolm here. Look, this is pretty normal. Monsoonal trough has come over Queensland probably ten days ago and moved from the north of Queensland to the south, and so over the past week, Dalrymple Bay has received around 400 millimeters of rain, and most of the rain has remained coastal. What that means is that the ability to stack coal or reclaim coal when it is very wet with rain is very limited. So there have been outages at the port. And there has been, like, a let us call it a seven-day interruption. But I view that as very short-term. In terms of our mines, we have had a little bit of seasonal rain there but nothing that has created a remarkable interruption at this stage.

Katja Janczyk: Okay. Thank you.

Operator: Again, if you have a question, our next question comes from Chris with Jefferies. Please go ahead.

Chris LaFemina: Thanks, operator. Hey, guys. Thanks for taking my question. I wanted to ask about the thermal coal segments. If we look at the 2025 guidance, it is basically lower volumes and probably lower margins. I mean, costs are flattish, and prices are going to be down at the cost of the pier. They actually to be up. But I wanted to kind of understand where the thermal segments will be heading after 2025. So it is helpful that we have, you know, you have given us some met coal guidance for 2026 on costs and obviously on volumes as well. But with thermal coal hitting because this C1 thermal volumes have been heading lower, PRB obviously heading lower. And it is hard to offset the negative impact of cost leverage when you have declining volume.

So we are looking at a thermal coal business that is going to have a flat to rising cost base and declining volumes, and then the EBITDA upside really just depends on higher prices, or is there anything else going on there that could lead to margin expansion and EBITDA growth without prices going up?

Jim Grech: Yeah, Chris. I will comment on the US platform, and then Mark and maybe Malcolm can give you some comments on the Australian platform. On the US platform, you know, the PRB tonnages, we have the ability to move those tons up and down. And, you know, some of the forecasts that you see may be pre all of the momentum we are getting currently here within the last few months in the US market. With the, you know, the Trump administration, the strong push for reliability and keeping coal plants open, the load growth. And so in the US, if the market demands are there, which we think, you know, those tailwinds are certainly getting much, much stronger. We can certainly respond with the tonnages in the PRB. Of course, we will also maintain some pricing discipline on that as well to do that.

So in the US, I would say the tonnage that you see any decreases made are based on market assumptions and not the physical asset base. So with that, I will let the other guys talk about the Australian platforms then.

Mark Spurbeck: Yeah. Good morning, Chris. Just, you know, briefly on seaborne thermal, you know, we are down, you know, this year, year over year. And we kind of talked a bit about this last quarter, but to just to reemphasize, I mean, we pulled, you know, about 200,000 tons forward to Wambo Underground in the fourth quarter and really, you know, really beaten Seaborn and Thermo in the fourth quarter. You know, we have already announced that that underground will cease operations midyear. So, you know, we are going to be down about 800,000 tons year over year at the Wambo Underground for comparison purposes. And Wilpin Young is declining as well, about a million, million four tons. Partially offset by the Wambo open cut, which we expect to be up 10%, maybe another 300,000 tons there.

So that is really the delta year over year. And, you know, going forward, we have not provided any guidance beyond 2025 except for what we anticipate from the acquisition. Just to put a marker out there. So we have not given any Peabody Energy Corporation guidance. You know, we have talked about this in the past. The Wilpin Young production continues to decline until we open up pit nine and ten. An extension, a few years out. But along with that is a continued decline in the domestic ton requirements. So I think this year, you know, we are probably looking at in that little over five million tons of export out of Wilpin Young. And I think over the next five years, you are going to see something pretty close to that, about 4.8 to 5 on average.

So I really see that being pretty consistent. And then as Jim mentioned, the US piece is really just demand-driven.

Chris LaFemina: Okay. Thanks for that. And just secondly on Grosvenor, I think Anglo had some comments this morning about having put some cameras down in the mine, and they saw limited damage, which is pretty encouraging, actually. And I think it seems like there is potential for that to maybe come online a bit sooner than people had expected based on what has been discovered so far. Just could you comment on your understanding of what is happening there and what your thought is about the potential restart for that asset in terms of timing, etcetera?

Jim Grech: Yeah, Chris. That is encouraging news to hear that you just mentioned about what Anglo stated. You know, we are really not in a good position to start putting out estimates of when we will open that mine back up and the costs to do that until we get ownership of it and can really see the conditions firsthand. So I will say that, you know, we do have optimism that we will be able to do that based on what we have been able to do with the Centurion mine. The experience we have, and the work we have with the regulators certainly are well-positioned to bring that mine back online, but we are not going to start giving out estimates on timeline or cost or anything. It is just a little too early for us because we just do not have enough information to do that yet.

Chris LaFemina: Understood. Thank you, and good luck.

Jim Grech: Thank you.

Operator: Next question is a follow-up from Nick Giles. Please go ahead.

Nick Giles: Thank you very much, operator. Mark, maybe in response to your earlier comments, you outperformed my model pretty meaningfully in the PRB, so I am sure Lucas took notice of that. But wanted to come back to Shoal Creek. It seems like production was stronger there, but wanted to get your take on kind of where realizations are today and maybe bigger picture, where does this asset fit in your portfolio longer term, and could a sale of the asset be an additional lever you could pull in the case of permanent financing?

Mark Spurbeck: I will start, and then maybe Malcolm can talk about realizations a bit more. But, yeah, Shoal Creek is really operating extremely well. You know, did a great year. We expect even better things in 2025, as I noted earlier. So operationally, it is hitting on all cylinders, doing absolutely everything that we anticipated they would do with the new longwall kit. You know, realizations have been a bit of a challenge, but maybe, Malcolm, you want to add a little color to that?

Malcolm Roberts: Look. Sure. Last call, I did give a sort of a breakdown as to where those Asian realizations are. And, obviously, with Europe not as strong for us at the moment, you know, a lot of our returns are coming from Asia. And at the moment, you know, to be honest, you are talking an FOB return on a short-term basis of somewhere between $120 and $130 for that grade of product. That is where the price point is if you are selling into Asia.

Nick Giles: Appreciate the color. Best of luck.

Jim Grech: Thank you.

Operator: The next question is from Matt Warder with The CoalTrader.com. Please go ahead.

Matt Warder: Hey, guys. Hope all is well over there. I actually had a follow-up question to Nick, who basically stole most of my thunder there. The realizations for Shoal Creek, is that basically just getting whacked due to the freight differential over to Asia? Is that the culprit there?

Malcolm Roberts: Yeah. Matt, Lucas, there are two things. You know, if you look at the top CSR coal, highest CSR coal, we are talking about those being at around $180 FOB in Australia. And now when we talk about closer to 60 CSR top coals, which Shoal Creek is, their returns are about $150 FOB metric. Then you have to take a freight differential off that and convert it to short tons, and that is how I get to my $120 to $130.

Matt Warder: Okay. That is all good. Also, with regard to the guidance, how are you guys looking at semi-soft and PCI realizations in 2025 this year? Any color on that would be really helpful.

Malcolm Roberts: Yeah. So within the existing Peabody Energy Corporation portfolio, we do not really sell into the semi-soft market. But what I can, and I would like to talk about the semi-soft market because, you know, that market is quite long at the moment, particularly out of Newcastle. So, you know, it has been a swing to Quentin semi-softs. And so that is part of what is happening with Newcastle returns. So there is a lot of that what used to be that lower semi-soft product now coming back into thermal. We think about Newcastle Thermal, that is the challenge there. So, yeah, semi-soft is quite challenged. In Europe, there have been in Poland, there have been a couple of outages, which we have seen some semi-soft demand come out of there, but really, semi-soft is quite weak.

But when it comes to PCI, there are two types of PCI. There is low vol PCI, high-quality PCI coming from mines such as Coppabella and Morinby North. And then there are byproduct PCIs, which tend to be higher in volatile matter. So when you come to that premium low vol category, we see that as really quite short and challenged and the like. And, you know, we probably see the relative price point at over 80% for that coal at the moment relative to prime low vol hot coking coal.

Matt Warder: Gotcha. That is pretty helpful. If I can switch gears for a second, I think it was Jim had a comment about receiving inbounds from PE firms about base load power for data centers. Is that something you guys are pursuing at all at this point? I know it was a kind of a discussion point with Thomas for a while there. Is that just wondered how you guys are thinking about that at this point in time.

Jim Grech: Well, Matt, first off, welcome to our earnings call. We appreciate the interest and the questions from yourself. Thank you for that. Secondly, you know, we are getting inbounds from companies that are trying to figure out how to serve this growing electrical load demands and do it reliably. And so people are looking at coal plants, and then if they are looking at coal plants, they want to know that it has long-term supply to those coal plants. So with the long life and low-cost reserves, we are, people naturally come to us and ask us if there is anything that we can work together, things that we would do, would we supply that, would we participate in that? So we are getting those inbounds. It has certainly picked up with the Trump administration and their favorable stance towards coal.

I would not say there is anything imminent or, you know, breaking on that, but, you know, from a few months ago where we had none of that type of interest coming in or almost none, it has been noticeably increased here in the recent, you know, month or two.

Matt Warder: Oh, that is interesting. I mean, I think that is something that the whole industry could take advantage of going forward. I did have one last sort of question which pertains to the Anglo assets, specifically their CapEx. If I recall correctly from the presentation, I think you are targeting a couple hundred million per year in CapEx for the first two or three years, and then it goes to a maintenance CapEx level of, like, $150, like, $13 per clean ton. Am I thinking about that right? And if so, what is the elevated level in the first couple of years? What was that being put toward?

Mark Spurbeck: Matt, you got that exactly right. Those are the numbers we have used. Really, the initial couple of years being higher is really due to some of the objectives we have to get that production levels up to what we forecasted. There is a new longwall, obviously, Morinby North, which is a big part in 2026. We also talked about some fleet enhancements at Cap Collins and etcetera. So there is a handful of things getting both the north and south district going to Morinby North, walk on, walk off capabilities, that kind of stuff. And there is for those types of things, and then we do see that leveling out to about $150 on an average basis going forward for, you know, I think we looked at it in the model probably for the next ten years on a sustainable basis.

Matt Warder: Okay. That is great. I think that is all I have here right now, but I will turn it back over. Thanks a lot for the call.

Jim Grech: You bet, Matt. Thank you.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Jim Grech for any closing remarks.

Jim Grech: Thank you, operator, and thank you all for the time today. I would also like to express my gratitude to the Peabody Energy Corporation team for the many excellent accomplishments we had in 2024, and we are planning a highly productive next several months. So we look forward to keeping everyone apprised of our progress. Thank you.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.