George Eadie

George Eadie asked about the percentage of PRB coal prices that are cost-linked, the exact depletion timeline for the Moorvale mine, and an update on the operational status and future capital expenditure plans for the Lupe mine, specifically regarding pit sequencing.

Answer

Malcolm Roberts, EVP and Chief Commercial Officer, clarified that PRB contracts are generally not cost-plus, but government policies, impositions, and taxes can account for 20-25% of price upside. Mark Spurbeck, Chief Financial Officer, stated that Moorvale mining will wind down by mid-2026, transitioning to Coppabella. For Lupe, he noted sustaining capital for the next 2-3 years, with a material capital slug of approximately $100 million expected around 2029 for pit 8, 9, and 10 extensions, including fleet and equipment.

George Eadie from UBS asked about the percentage of Peabody's PRB prices that are cost-linked and if a $5/short ton margin could be fully captured on 2027 contracts at $17/short ton if costs remain flat. He also inquired about the impact of taxes and rebates on price upside, the depletion timeline for Moorvale Mine and its effect on CMJV volumes, and the operational status and future capital expenditure for Wilpinjong Mine.

Answer

Malcolm Roberts, Peabody's Chief Commercial Officer, explained that PRB contracts generally do not have cost-linked pricing, except for government policy or taxes, and pricing is based on market levels. He agreed that royalties, taxes, and similar factors could account for 20-25% of the book, offsetting some price increases. Mark Spurbeck, Chief Financial Officer, stated that Moorvale Mine would wind down in the second half of 2026, transitioning production to Coppabella, expecting a slight year-over-year decline for the combined CMJV entity. For Wilpinjong, Mr. Spurbeck noted sustaining capital for the next 2-3 years, with a significant capital expenditure (around $100 million for fleet and equipment) anticipated around 2029 for pit extensions.

George Eady of UBS asked about the potential financial liability for Peabody if it terminates the Anglo American deal under the Material Adverse Change (MAC) clause and is later found liable. He also inquired about the timing for a potential sell-down of the Centurion mine and whether any sale contract might include clauses related to production hurdles.

Answer

President and CEO Jim Grech expressed high confidence in the company's MAC position, stating they would not set aside a reserve for a hypothetical negative arbitration ruling and that the shareholder return program would not change. Regarding Centurion, Mr. Grech clarified that a sell-down is a possibility, not a commitment, and declined to comment on potential terms or a specific timeline, noting there is no hurry to make a decision.

George Eady of UBS asked about Peabody's potential liability in the Moranbah North MAC dispute, how the company would handle a negative outcome, and its impact on cash returns. He also inquired about the timing of a potential sell-down of the Centurion project and whether a sale contract might include production-related clauses.

Answer

President and CEO Jim Grech expressed high confidence in the company's MAC position, stating they are prepared for arbitration and will not change the shareholder return program. Regarding Centurion, Mr. Grech noted a sell-down is a possibility but not a commitment, and he declined to comment on hypothetical contract terms or provide a specific timeline, stating there is no hurry to make a decision.

George Eady of UBS questioned Peabody's confidence in its Material Adverse Change (MAC) position regarding the Anglo American asset acquisition, asking about potential liabilities and the impact on cash returns during a possible arbitration period. He also inquired about the timing for a potential sell-down of the Centurion mine and whether any sale contract might include production-related clauses.

Answer

President and CEO Jim Grech expressed high confidence in the company's MAC position, stating they are prepared for arbitration and see no need to reserve for hypothetical damages. He affirmed that the shareholder return policy of returning at least 65% of adjusted free cash flow remains unchanged. Regarding the Centurion mine, Mr. Grech clarified that a sell-down is a possibility, not a commitment, and declined to provide a timeline or comment on potential terms, noting there is no hurry to make a decision.

George Eady of UBS inquired about Peabody's potential liability and financial strategy if the Moranbah North MAC dispute results in an unfavorable arbitration ruling. He also asked about the timing for a potential sell-down of the Centurion project and whether the sale contract might include performance-based clauses.

Answer

President and CEO Jim Grech expressed high confidence in the company's MAC position, stating they are prepared for arbitration and do not see the need for a financial reserve for a negative outcome. He affirmed the shareholder return program is not expected to change. Regarding Centurion, Grech noted a sell-down is a possibility, not a commitment, and declined to provide a timeline or comment on hypothetical contract terms.

George Eadie from UBS Group AG inquired about the current cost profile for the Blue Creek project versus prior guidance and its potential trajectory. He also asked about the strategy for ramping up Blue Creek volumes in a weak price environment and the consequent impact on gross price realization, later following up on the overall cost structure and SG&A spending.

Answer

CFO Dale Boyles stated that previous Blue Creek cost guidance was based on a higher price environment and it's too early for a new specific number, but confirmed its positive impact. CEO Walter Scheller added that volume expansion depends on securing contracts, not flooding the spot market. Boyles acknowledged the risk to the 85-90% realization target in the current market, attributing the recent 80% realization to the wide index spread, and noted SG&A guidance accounts for future Blue Creek ramp-up needs.

George Eadie of UBS questioned the specifics of the remaining CapEx for the Blue Creek project, the reason for the Q1 working capital build, and the met coal price assumption used for the company's annual guidance.

Answer

CFO Dale Boyles and CEO Walter Scheller clarified that remaining CapEx is primarily for final construction labor on the prep plant modules, the overland belt, and the barge loadout. Boyles attributed the working capital build to Blue Creek inventory and expects it to continue in Q2 before reversing as sales commence. He also stated the annual guidance was based on a $200/metric ton met coal price.

George Eadie of CLSA inquired about the long-term sustainability of cost reductions at the Curragh mine after removing five contractor fleets and asked for quantification of the expected yield improvements at the Buchanan mine's new Northern District panel.

Answer

Managing Director and CEO Douglas Thompson explained that the operational changes at Curragh are designed to create a long-term sustainable stripping ratio geared towards draglines, mitigating the risk of needing to bring back fleets. For Buchanan, he stated the new panel will be ready in Q3 and is expected to deliver a yield improvement of approximately 6%, with a target in the mid-50s percentage range.

George Eadie from UBS asked for quantification of elevated stockpiles at Curragh and questioned the impact of increased dragline waste movement on rehandle and potential bottlenecks.

Answer

CEO Douglas Thompson declined to provide specific stockpile volumes but confirmed healthy inventories across in-pit, ROM, and product stockpiles. He clarified that the improved dragline productivity (44% of waste vs. 37% previously) is for prime waste movement, resulting from past investments in pit geometry that optimize dragline performance. Thompson stated that rehandle assumptions in the current plan remain the same, though opportunities for improvement exist.

Asked for quantification of Curragh's elevated stockpiles and inquired about dragline rehandle assumptions and potential bottlenecks given the increased proportion of waste moved by draglines.

Answer

The company declined to quantify stockpiles but confirmed they are healthy across all stages. The increased dragline productivity is from more efficient prime digging due to better pit geometry, not from taking on more rehandle, which is planned to remain the same. New equipment is also improving pre-strip productivity.