Peabody Energy Q2 2025 Earnings Report

Peabody Energy EPS Results

• Actual EPS: -$0.06
• Consensus EPS: -$0.04
• Beat/Miss: Missed by -$0.02
• One Year Ago EPS: $1.42

Peabody Energy Revenue Results

• Actual Revenue: $890.10 million
• Expected Revenue: $944.27 million
• Beat/Miss: Missed by -$54.17 million
• YoY Revenue Growth: -14.60%

Peabody Energy Announcement Details

• Quarter: Q2 2025
• Date: 7/31/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, July 31, 2025
• Conference Call Time: 11:00AM ET

Peabody Energy (NYSE:BTU) engages in coal mining business in the United States, Japan, Taiwan, Australia, India, Brazil, Belgium, Chile, France, Indonesia, China, Vietnam, South Korea, Germany, and internationally. The company operates through Seaborne Thermal, Seaborne Metallurgical, Powder River Basin, Other U.S. Thermal, and Corporate and Other segments. It is involved in the mining, preparation, and sale of thermal coal primarily to electric utilities; mining bituminous and sub-bituminous coal deposits; low sulfur and high British thermal unit thermal coal; and mining metallurgical coal, such as hard coking coal, semi-hard coking coal, semi-soft coking coal, and pulverized coal injection coal. The company supplies coal primarily to electricity generators, industrial facilities, and steel manufacturers. It also engages in marketing and brokering of coal from other coal producers; trading of coal and freight-related contracts, as well as provides transportation-related services. The company was founded in 1883 and is headquartered in Saint Louis, Missouri.

Peabody Energy Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Peabody raised its full-year guidance after a strong first half, citing record safety, robust volumes, and cost containment that outperformed expectations.
• Positive Sentiment: The longwall startup at the premium hard coking coal mine Centurion has been accelerated to February 2026, with shield installation in November and headcount ramping to around 400 employees.
• Positive Sentiment: Recent US legislation cuts federal coal royalty rates from 12.5% to 7% and adds a 2.5% production tax credit for met coal, expected to save Peabody $15–20 million in 2025.
• Positive Sentiment: US coal fuel generation rose 15% year-over-year, customer stockpiles fell 11%, and deferred plant retirements are securing new supply agreements, tightening thermal market fundamentals.
• Negative Sentiment: Peabody and Anglo American disagree over a Material Adverse Change at Moranbah North, and Peabody may terminate the asset purchase if no resolution is reached by August 19.

Presentation

[Operator]

Good day, and welcome to the Peabody Q2 twenty Earnings Conference Call. Today, all participants will be in a listen only mode. Please note that today's event is being recorded. I would now like to turn the conference over to Vic Speck, Vice President, Investor Relations. Please go ahead, sir.

[Vic Svec, SVP, Global Investor and Corporate Relations at Peabody Energy]

Well, thank you, operator, and good morning, everyone. Thanks for joining today to take part in Peabody's second quarter call. Remarks today will be from Peabody's President and CEO, Jim Grech CFO, Mark Sberbeck and our Chief Marketing Officer, Malcolm Roberts. Following remarks, of course, we will open up the call to questions. Now we do have some forward looking observations today.

[Vic Svec, SVP, Global Investor and Corporate Relations at Peabody Energy]

You will find our full statement on forward looking information in the press release. We encourage you to consider the risk factors referenced there, along with our public filings with the SEC. And I'll now turn the call over to Jim.

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

Thanks, Vic, and good morning, everyone. Peabody has had a great first half of the year.

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

We've had record safety, solid volumes, strong cost containment. And on the basis of both our performance and our prospects, I'm pleased to report that we're raising our full year guidance. To echo my first quarter theme, the Peabody team continued to do an excellent job of controlling the controllables in the first half, with second quarter costs coming in below our expectations. Our ability to manage costs is a key driver of success at a time of cyclical market softness in the seaborne markets. Also of note, today we announced an acceleration of longwall operations at our flagship premium hard coking coal mine, Centurion.

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

We're now targeting longwall start up in February 2026. This improved timeline reflects strong execution across our operations team. By way of progress, we plan to start installing long wall shields in November. Workforce expansion remains a key focus. We already have approximately two sixty employees hired.

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

Through an active recruitment process, we aim to reach a headcount of around 400 by early twenty twenty six to support full production. I'd be remiss if I didn't also speak of the strong tailwinds in The US markets. Last quarter, the President signed executive orders to revitalize The US coal industry and expand the use of coal fuel generation. And earlier this month, the One Big Beautiful bill was passed. It delivers long overdue relief to American coal producers by reducing royalty burdens, streamlining permitting and restoring regulatory certainty, enabling the industry to compete, invest and power the nation with confidence.

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

How does the bill benefit Peabody? First, the reduction in federal royalty rates on mining leases from 12.5% to 7% is expected to generate substantial savings in the PRB beginning this quarter. Based on initial analysis, Peabody anticipates 15,000,000 to $20,000,000 in net benefits from the royalty changes in the 2025, and this should also improve PRB competitiveness going forward. Also, bill provides a 2.5% production tax credit starting January 1 for eligible domestic coal used in steel making, a benefit that applies to our Shoal Creek Metallurgical Mine in Alabama. As evidence of the need for renewed focus and common sense in US energy policy, this legislation, combined with rising electricity demand, marks a clear turning point for US coal.

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

It reframes coal not as an inconvenient truth relic, but as a critical cornerstone of grid reliability and energy independence. The June 2025 heat wave made this clear. As demand surged across PGM and MISO, it was coal and natural gas that kept the grid stable while renewables were unable to scale quickly enough. To frame the new electricity landscape in The US, just one independent system operator recently forecasted a 32 gigawatt increase in power demand by 2,030, and 30 gigawatts are related to data centers. To put this in context, they noted that increase is comparable to adding 20,000,000 new homes to grid in the next five years.

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

When thinking about coal in the future, I'd ask you to focus on six surprising words. The world is turning towards coal. I'll remind investors that the IEA reports that the world set a record for coal demand in 2024, after doing so also in 2023, and has not yet peaked. And US coal is clearly in comeback mode, as it should be. The US has more energy in its coal reserves than any nation has in any one energy source.

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

Malcolm, I'll now turn the call over to you to give a bit more color on the markets.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

Thanks, Jim. Now I'll add a few details regarding US dynamics before turning to seaborne markets. In The US, we've seen a great first half of the year with coal fuel generation up a whopping 15% over the 2024. That's a function of coal increasing share given high natural gas prices relative to the prior year, as well as a growing electricity generation pie as industrial activity and emerging data center demand underwrites continued electricity demand growth. That terrific picture has translated into higher demand, more than improved pricing at this stage.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

We note customer stockpiles are down some 15,000,000 tonnes versus this time last year. That represents an 11% reduction from a year ago, the lowest level since 2022. That bodes well for tightening The US thermal supply and demand fundamentals as we move forward. In addition to existing coal plants running much harder this year, we continue to see deferrals of retirements within The US coal fleet. Simply put, most utilities need all the electrons they can muster, and coal plants offer some of the best incremental generating capacity with predictable fuel costs, reliable performance and readily storable fuel that is ready for dispatch twenty four hours a day, seven days a week.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

Deferrals of coal plant retirements have directly translated into new coal supply agreements for Peabody, a phenomenon that we expect to continue. We've increased PRB volumes this year and have sold out at our flagship North Antelope Rochelle mine at these higher levels. My final point is that recent moves in The US to increase LNG exports, including the recent US agreement for major new energy purchases by Europe, should only tighten US natural gas supplies as it moves to a greater parity with seaborne LNG. Seaborne thermal coal markets are also finding support in recent weeks. Demand has been driven by hot summer weather in Asia and really across the whole Northern Hemisphere, and that has reduced stockpiles and driven stronger bids.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

We've seen greater spot demand from our premium markets such as Japan as they move to secure additional supplies as coal burn exceeds anticipated levels. China's import demand had been under pressure due to a 6% increase in domestic coal production through May. Along with stronger renewable generation, thermal power generation is down 3% year to date, limiting their appetite for imported coal. In India, high stockpiles and lower electricity demand has also been keeping import volumes subdued. Thermal supply is adjusting to softer demand and lower prices with Indonesia and Colombia in particular reducing exports.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

For seaborne metallurgical coal, we naturally avoid forecasting prices, but we are observing meaningful supply curtailments and policy adjustments that suggest we are midway through what is typically an eighteen to twenty four month downward portion of the price cycle, and we are beginning to see some green shoots. Minor remains the world's largest coal consumer given that it accounts for over 60% of global steel production. And there, we are seeing some classic early signs of a market turnaround. That's true in steel, where recent production curves have been announced, which are expected to have a dampening effect on Chinese steel exports moving forward, aiding steel production from countries that rely on met coal imports to a greater degree. It's true in coal production, where the government has just announced it's cracking down on provinces and coal mining companies exceeding production quotas, and it's true in infrastructure, where projects such as Yalan Zhongbo Dam in Tibet are being developed.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

This dam will be by far the largest in the world, will use large amounts of steel and concrete, and will cost more than 100 times than the Hoover Dam in The US on a current dollar basis. These elements combine to suggest that the Chinese playbook is being executed similar to past downturns. While China remains a key influence this time around, Indian demand growth may drive the next peak of recovery. India enters the monsoon season with just thirty six days of inventory and limited restocking activity. We look for a number of new blast furnaces to accelerate seaborne coal demand by eight to 9,000,000 tonnes during the 2025.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

I'll remind investors that the production of a ton of steel in India uses four to five times the amount of seaborne metallurgical coal as a ton of Chinese steel, given that India doesn't have notable domestic quantities of met coal. This phase of the met coal cycle also reflects the supply contraction in prior times. By our estimate, over 25,000,000 tonnes of met coal capacity remains offline globally, with substantially more volume in loss making mode at these levels. Bottom line, while this part of the cycle has not been pleasant, we see it playing out in a similar way to past cycles. We are seeing early signs of an upturn with the real question of not if, but instead when.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

That's a brief review of the coal market dynamics. I'll now turn the call over to Mark.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

Thanks, Malcolm, and good morning all. As Jim mentioned, we had another strong quarter and continue to successfully navigate a challenging seaborne price environment. Seaborne pricing continued to ebb with the broader industrial cycle, steel production, and power generation in the second quarter. But with this cyclicality comes great opportunity. Our strategy remains to manage the lower points of the cycle to capture outsized free cash flow when we return to better price points.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

EBody manages that volatility with a fortress balance sheet, effective capital allocation, operating cost discipline, and a diversified asset portfolio. This quarter, our US thermal platform led the way, generating $57,000,000 of adjusted EBITDA. Let me add some insight into the second quarter financials. We recorded a GAAP net loss attributable to common stockholders of $27,600,000 or $0.23 per diluted share, while generating adjusted EBITDA of 93,000,000 The team turned in another great quarter of cost management with three of four segments coming in better than company targets. PRB volumes came in higher than expected.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

We generated $23,000,000 in operating cash flow, using some cash from the balance sheet to continue development at Centurion, now just six months away from longwall production of premium hard coking coal. We ended the quarter with $586,000,000 of cash and nearly $1,000,000,000 of liquidity. Let's review the quarterly segment results. The Seaborne Thermal segment recorded $33,500,000 of adjusted EBITDA and 17% margins, even with the loss of 400,000 tons from end of quarter port congestion. Regardless, the segment still beat second quarter cost guidance.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

Margins remain robust in the face of a modest price environment underscoring the strength of our position on the thermal cost curve. The seaborne metallurgical segment reported adjusted EBITDA loss of $9,200,000 or 23% lower average realized prices year over year. Costs remained well below company targets as the team continued to control the controllables, while investing in the Capavela high wall with additional overburden movement to ensure more reliable production for years to come. The US thermal mines generated $57,000,000 of adjusted EBITDA. This platform continues to demonstrate why we believe The US business with its stable free cash flows and low capital requirements is underappreciated and remains a key part of our leading diversified asset portfolio.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

In the Powder River Basin, sales volumes exceeded expectations, even with 11 inches of rain over sixty days in Q2, or nearly their full year average rainfall. With that rain came excess moisture, leading to a negative 20¢ per ton quality adjustment to realize sales price, making the 2.16 per ton margin even more impressive. The PRB improved margins by better than a dollar per ton year over year and generated $43,000,000 of adjusted EBITDA. The other US thermal segment delivered $13,500,000 of adjusted EBITDA. Sales volumes were less than expected as Bear Run experienced poor rail performance and twenty Mile continued to operate in challenging mining conditions in the 6 East panel.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

The twenty Mile team is eagerly anticipating finishing that panel in the next couple of weeks. We will begin moving the Longwall to a new district in mid August and should start cutting coal in the Lebanese panel at the beginning of the fourth quarter. The Lebanese panel is positioned at the edge of a coal seam with much better geology and we expect to return to historical production rates. Looking ahead to the third quarter, seaborne thermal volumes are expected to be 3,900,000 tons, including 2,700,000 export, 600,000 of which are priced on average at $82 per ton. While 1,000,000 tons of Newcastle product and 1,100,000 tons of high ash coal are unpriced.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

Seaborne thermal costs per ton are expected to be between $45 and $50 per ton, in line with full year guidance. Seaborne met volumes are targeted at 2,200,000 tons, consistent with the second quarter, while costs are expected to improve a bit further to $115 per ton. In the PRB, we expect a significant increase in volume to 23,000,000 tons. Costs are also expected to improve from the second quarter and come in lower at about $11.25 per ton, leading to continued robust margins. Other US thermal coal shipments are expected to increase to 3,700,000 tons with better rail performance at Bear Run.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

Costs are also anticipated to improve to approximately $47 per ton. Rounding out the discussion with several favorable changes to full year guidance. Seaborne thermal volumes are anticipated to be 200,000 tons higher and cost $3 per ton better at $45 to $48 per ton. Seaborne met cost targets are better by $7.5 per ton to $150 to $120 per ton. With the strong first half and recent legislation, the company is increasing PRB volumes by 5,000,000 tons and lowering full year costs by $0.63 to $11.5 to $12 We are also reducing full year CapEx 30,000,000 to $420,000,000 Jim, I'll now turn the call back to you.

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

Thanks Mark. Before turning to questions, I'll now give a brief update on the previously planned acquisition of assets from Anglo American. Here's where we are. It has now been four full months since the ignition incident at Anglo's Moranba North mine, and yet there is still no credible timetable on the resumption of sustainable longwall mining. Impact on the value of the assets include monthly lost production and revenue, carrying costs of tens of millions of dollars per month, expected capital related to new longwall equipment that will be needed for sustainable longwall mining, significant probable de rate of future productive capacity at the mine, and questions around both the availability and willingness of the workforce to resume safe underground long wall mining in the current panel if regulators ever allow it.

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

Our understanding of conditions underground, along with the continued passage of time, has further confirmed our strong belief that a material adverse change has occurred. A thorough review has led to this perspective by our underground mining team, our engineering staff, third party experts, and executive management. While some modest near term activity may occur, this should not be mistaken as being equivalent to having a predictable timeline and quantifiable cost and productivity impact assessments associated with achieving sustainable mining in the current longwall panel. Four full months after the event, the exact cause of the ignition event remains unclear. And by Peabody safety standards, we would not restart operations at the current longwall face.

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

We are highly confident that sustainable longwall mining won't take place at Moranba North until after a new longwall is fully commissioned in a new section of the mine in 2026. The priorities we identified several months ago have not changed. Intends to rely on its rights under the purchase agreements, which give Peabody the ability to terminate. Any revised deal would require a substantial revision in value and structure that reflects the material change in the previously agreed upon transaction, as well as safe, sustainable longwall mining at Moranbah North at forecasted volumes and cost. Teabody has not reached a revised agreement with the seller, and we intend to provide a further update on August 19 after the ninety day MAC cure period expires.

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

We appreciate your patience as we conclude a process that has now been underway for nearly a year. With that operator, we can now open up the line to questions.

[Operator]

Thank you. We will now begin the question and answer session. And session. Today's first question comes from George Eady with UBS. Please proceed.

[George Eady, Analyst at UBS]

Yes. Hi, team. Thanks for the time today and hope you're keeping well. Could you maybe please help us start with more on our North and the MAC? Just help us understand how you're thinking about going forward under the MAC in the scenario where you're found liable in, say, two years.

[George Eady, Analyst at UBS]

This may be unlikely in your view, but I'm sure it's a scenario you've considered and have put a quite a bit of thought into. So could you maybe help us how you think about paying for such a liability and maybe some color how we should be thinking about it in terms of potential cash build and returns over the insurance period if you were to declare a mark?

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

Yeah, hey George, thanks for the question. Look, we're very, very confident in our MAC position going forward. So if you look at what's been going on at the mine, as I said in my comments, it's still to be determined the exact cause of the ignition. So the impacts of future operating conditions are unknown. There's no known credible restart date for this mine.

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

And while that's occurring, while the mine hasn't restarted, there's significant monthly carrying costs being occurred. And we, as I said in my comments, we consider what's got the future scenario that long wall panel is going to be sealed off. And the need of a new long wall being in place in a different area of the mine would be the path to getting sustainable longwall production again at that mine, and it's probably going to be at a significant de rate going forward because of new operating conditions, because of the past operating history of the mine. And on top of that, have all this monthly loss production and revenue. So again, we are very, very confident in our MAC going forward.

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

And if we have to pursue this in arbitration, we are ready to do so.

[George Eady, Analyst at UBS]

Just on that, if you do continue with the MAC, if we get two years down on the small chance, maybe in your view that you are sound liable, like how should we think about cash returns and the balance sheet over the next two years going to that period? Even though it might be very unlikely, it still is a chance.

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

So again George, I'm not sure your question exactly. We have our program in place where we return 65% of our adjusted free cash flow back to our shareholders, at least 65% of our adjusted free cash flow. So that's a program we have in place. So if you're asking about that, that's not going to change. And if you're asking about a possible arbitration ruling or something, we're not gonna put any reserve for that because that's more likely than not view that we would face damages.

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

Your questions for us are just purely hypothetical about damages occurring. We are 100% confident in our MAC, and we are 100 confident if we go to arbitration that we would be proved correct in the position we're taking.

[George Eady, Analyst at UBS]

Okay, now that's fair. And maybe just switching gears, Centurion, can you remind us maybe what the latest there is on the sell down timing? And then given this is a restart project and we spend a lot of time talking about longwall reliability of the Goonyella theme, is there any chance or any talks of a cause in that contract with a sell down that a buyer could potentially have the right to walk away or adjust terms if certain production hurdles haven't been met? Is that something that's being considered?

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

George, again, you're asking a hypothetical, I'm not going to go down that path. And if we were in negotiations, wouldn't comment on those negotiations. But again, as for Centurion, that's a potential, is the sell down of Centurion and it's no way a commitment that we're going to do so. We'll make a decision how we're going to handle Centurion based on what's best for our shareholders going forward, and it has nothing at all to do with obviously this Anglo situation. So I have no comment on any possible terms, because there aren't any possible terms to be discussed right now.

[George Eady, Analyst at UBS]

Okay, yep, excellent. Timing though, is there any indication you can give of when it could potentially happen?

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

No, there's nothing. I'm not going to give any timing indication. We have had a lot of interest and we have had some discussions at this point in time, but we feel in no hurry to make a decision at this point in time on Centurion.

[Operator]

And today's next question comes from Chris Lathamyna with Jefferies. Please proceed. Mr. Lafamina, you're Sorry, guys.

[Chris LaFemina, Equity Research Analyst at Jefferies Financial Group]

I have my I have my mute on. Sorry. So thanks for taking my question. I just wanted to ask a couple of follow ups actually on the on the Anglo deal. So Anglo this morning talked about being constructive and flexible in their discussions with Peabody and it sounds like the discussions obviously haven't gone very well.

[Chris LaFemina, Equity Research Analyst at Jefferies Financial Group]

The first question I would have is whether you're in current discussions with Anglo or have you hit an impasse and now things are kind of on hold and maybe you restart negotiations before the August 19 deadline. But are you speaking with them now or are things just kind of on the sidelines right now?

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

Hi Chris, good morning. Yeah, we've had very candid and respectful conversations with Anglo, we at the highest levels between the two companies. But I'll say the status is right now we just have a very fundamental disagreement over the quantum of the impact. We are obviously 100% certain there's a MAC and we feel we have all of the data, it's evident to back that up. And right now, my assumption is that Anglo is saying that there isn't a MAC occurring.

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

So we have a fundamental disagreement over the mine, the status of the mine, and the quantum of the impacts of what's occurred at the mine. So we've had some very, again, very respectful discussions. I'm appreciative of the give and take that's been going back and forth. But again, we just have a fundamental disagreement of the status of the mine now, how it's been over the past four months, how it's going to be for the rest of this year, and how it's going to be next year going forward.

[Chris LaFemina, Equity Research Analyst at Jefferies Financial Group]

So the dispute here is related to whether Moranba North is a MAC event. And is there a potential solution where you meet in the middle where, you know, you kind of structured the initial deal with the Grosvenor, asset on contingent deferred payments? How about something like that related to Moranbah North? I mean, if if they if you think it won't come back online and they do, well, you don't pay for it unless it does kind of thing. Mean, is there some sort of I'm sorry to ask the triathlete question, but just trying to think of where the two sides can meet in the middle where you can basically, if the mind comes online, you pay for it. If it doesn't, you don't.

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

Chris, you sound like you're trying to be a mediator in a dispute. So I appreciate the efforts, but look, I'm not going to get into any negotiations on an earnings call. August 19 date isn't that far away from us. And at that time we can just talk freely about everything that's going on.

[Chris LaFemina, Equity Research Analyst at Jefferies Financial Group]

Okay. And then just the last question, if you do go to arbitration, let's assume that were unfortunately to happen. Does the BOOMA transaction terminate as well? What are the consequences of going to arbitration?

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

Yes, if we terminate the deal, then the BOOMA transaction, the deal we have with BOOMA terminates as well, back to back.

[Chris LaFemina, Equity Research Analyst at Jefferies Financial Group]

Okay. Thanks for that.

[Operator]

And the next question is from Nick Giles with B. Riley Securities. Please proceed.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

Thanks, operator. Good morning, everyone. Just a first follow-up on Anglo. I mean, the views on Morbinorf's impact continue to differ substantially. So I was just wondering if you had any additional color on what should we be looking for on August 19 when you come up with this update?

[Nick Giles, Senior Research Analyst at B.Riley Securities]

I mean, should we be thinking the determination will shortly follow? Can you just kind of remind us of the factors and potential timelines at play on the back of that update?

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

Nick, again, I'm not going to get into negotiations or hypotheticals or what may be occurring on August 19. I'll just say that there was a ninety day period to cure the MAC, and at the end of the ninety day period we have the right to terminate the agreement. And that's the situation, and we'll wait till August 19.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

Understood, Jim. And apologies if I missed them all, but you did list a number of factors that underpin Peabody's fee that a MAC has occurred. And I couldn't quite compare those to the ones that you provided last quarter. So I was just wondering if could you provide us what which of those factors are somewhat incremental, which have changed in your mind? Thanks a lot.

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

Yeah, Nick, I'm not sure to compare to previous statements you're asking me to. I don't have that in front of me to compare one set of statements to the other. What I will say is in order to solve a problem you have to understand what the problem is. And to date, the exact cause of the ignition has not been determined. So again, so how do you address that It still needs to be addressed.

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

And then there is the status of the current longwall, and is that longwall recoverable in the current panel? Will it be running again in that panel? Which again, we don't think is a scenario that's going forward. And then you're gonna have de rates, probable de rates of the facility going forward because of future operating conditions that are put on based on the past operating history of the mine. And then also you have all the monthly loss production and revenue.

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

And we think this is gonna go on well into, not well into, I shouldn't say that, into some point in time next year. So all of those factors are in there. And again, I'm not sure how that compares to what I said previously.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

Got it. Understood. Now Jim, I appreciate you walking us through what you can here. But maybe just on the operating side, you've lowered your seaborne thermal cost guidance by $3 a ton at the midpoint. So unless I'm mistaken, I think the full year guide still implies that cost could be higher in the second half.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

So just wondering what are the ultimate drivers there? I mean, we do have Wambo coming offline, which I know to lower costs. So, I'm just trying to figure out which factors are offsetting each other. Thanks a lot.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

Hey, good morning Nick, it's Mark. You're right. The team has done an absolutely incredible job managing costs. We talked about this last quarter, another great quarter of costs, really leading us to believe that those costs are going to be lower on a full year basis. We did lower them $3 We missed 400,000 tons purely due to port congestion.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

We've seen a lot of that come back in July. We've raised our full year guidance by 200,000 tons in the segment and the net result is lower cost by $3 for the full year. So really happy with all the progress we've made.

[Operator]

And our next question comes from Katya Jantzik with BMO Capital Markets. Please proceed.

[Katja Jancic, Metals & Mining Analyst at BMO Capital Markets]

Hi, thank you for taking my questions. Maybe going back to Centurion, given that the development is progressing ahead of schedule, can you talk a bit more about how this could impact the sales targets there?

[Mark Spurbeck, EVP & CFO at Peabody Energy]

Katya, it's Mark again. Couple of things, one, pulled that longwall production forward earlier into the first quarter of next year, really just six months from now. So very exciting time. Think back the company is self funded by organic cash flow, 600,000,000 to date on the development of that key asset. But $100,000,000 to go in the South before that longwall production starts.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

Pulling it forward earlier, we'll obviously start production earlier, but when you look at the timing of the production there, it probably also may accelerate a longwall move, their first longwall move. Previously we have 3,500,000 tons out there for next year production. We're not changing that yet today.

[Katja Jancic, Metals & Mining Analyst at BMO Capital Markets]

Okay. And then maybe on the PRB cost, just to confirm, that includes now the new royalty rate?

[Mark Spurbeck, EVP & CFO at Peabody Energy]

Yes, does. So, the lower reduction from 12.5% to 7% is baked into that guidance. So increased volumes by 5,000,000 tons in the PRB for the full year, seeing continued strong demand. We will have a benefit to our costs in the second half of the year due to that lower royalty rate. As you mentioned last quarter, a portion of that does go back to certain customers.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

We'll actually see that as a net reduction in revenue, our average realized sales price. So, a little bit comes out there, but net net we're looking at about a $0.40 per ton benefit to Peabody tons. So, that's in that 15,000,000 to $20,000,000 range.

[Katja Jancic, Metals & Mining Analyst at BMO Capital Markets]

And then going next year, I think on an annualized basis, it would be closer to $60,000,000 if I'm not mistaken. Is there opportunity to further increase the potential benefit versus what you're getting right now?

[Mark Spurbeck, EVP & CFO at Peabody Energy]

Yeah, going forward, obviously that benefit, as Jim mentioned in his remarks, will make the PRB coal just more cost competitive. So we expect that to help overall volumes. How much of that is the Peabody's account will depend on new contracts as we sign that up. Right now we're probably about two thirds signed up for '26 and maybe 50% for '27.

[Katja Jancic, Metals & Mining Analyst at BMO Capital Markets]

Okay, thank you.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

You're welcome. Thanks, Katya.

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

Thanks, Katya.

[Operator]

And the next question comes from Nathan Martin with The Benchmark Company. Please proceed.

[Nathan Martin, Equity Research Analyst at The Benchmark Company LLC]

Thanks, operator. Good morning, everyone. I think a lot of my questions have been touched on, but you mentioned Shoal Creek will benefit from two and a half percent production tax credit for met coal that was included in the big beautiful bill. Could you guys put a savings estimate kind of around that what you did for the PRB?

[Mark Spurbeck, EVP & CFO at Peabody Energy]

Yeah, Nate. Just a reminder that doesn't take effect until 01/01/2026. So, nothing in the full year guidance for that. But I'd put it above $5,000,000 a year.

[Nathan Martin, Equity Research Analyst at The Benchmark Company LLC]

Okay. Thanks Mark. And then maybe while I have you, I know I've talked about this on numerous occasions. But once again, costs this quarter as well as resource management results added significantly to the 2Q adjusted EBITDA. Any specifics there to call out?

[Nathan Martin, Equity Research Analyst at The Benchmark Company LLC]

I know these segments are lumpy, but can you talk about what your expectations are here for the second half? Are there any other big drivers you see there?

[Mark Spurbeck, EVP & CFO at Peabody Energy]

Yes, Nate, you're right. We did have some unexpected performance really from some asset sales in the second quarter. We had a continuous miner sale at the Wambo Underground mine. As you recall, that will be closing down in the third quarter, as well as some miscellaneous U. S.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

Land sales. We have a large portfolio of land and from time to time we optimize that portfolio, make sales these assets. It is lumpy and unpredictable. I will say that that offset the 400,000 tons we lost in The U. S.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

Thermal business, really mostly due to that poor rail performance at the Bear Run Mine, as well as the 400,000 tons we lost just simply due to port congestion, which we're making back up obviously in the second half by increasing that full year guidance. Those two kind of really offset each other and everything's on track.

[Nathan Martin, Equity Research Analyst at The Benchmark Company LLC]

Are there any big items you kind of see over the second half, Mark, or are still uncertain?

[Mark Spurbeck, EVP & CFO at Peabody Energy]

No, as far as the other items, there's nothing to forecast there.

[Nathan Martin, Equity Research Analyst at The Benchmark Company LLC]

Okay, got it. Helpful. Then maybe finally just switching gears. As I'm sure you guys are aware, one of your peers in the PRB is ramping up a new rare earth mine. That's been getting a lot of attention.

[Nathan Martin, Equity Research Analyst at The Benchmark Company LLC]

Jim, has Peabody done any testing of its reserves at this point to see what if any reefs are present? Just thinking about this given the favorable administration and regulatory backdrop we're seeing currently.

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

Yeah, Nate, that's a timely question. We are advancing into what I'll call a second phase of our rare earth element evaluation program in the PRB. We had an initial study that we did with the University of Wyoming that we concluded last year, so now we're into the second phase. But the initial data from that study suggested that our roof and floor strata adjacent to the current mining seams could contain some elevated levels of these rare earth elements at both our NARM complex and our Rawhide Complex. And these initial indications that we have seem to show that we have the same or better concentrations than others reporting the PRB.

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

And I will say one thing that is important to note as we move forward with this, the rare earth elements that are sitting in these clays are very accessible to us because we're already uncovering them in the coal mining process. We're going need to develop new mines to excavate this overburden. So this quarter we're going to do some more sampling and laboratory analysis at our sites. So we're in some very early days, but we certainly have more than enough information justifying going forward. So this is not any real appreciable capital for us right now.

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

We're in the study phase. Very, very encouraging initially, But I guess I'll leave it. Nate, stay tuned for some more information as we advance this.

[Nathan Martin, Equity Research Analyst at The Benchmark Company LLC]

Okay, appreciate those thoughts guys. Thanks for the time and best of luck in the second round.

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

Thanks Nate.

[Operator]

And the next question is a follow-up from Nick Giles with B. Riley Securities. Please proceed.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

Thanks for taking my follow-up. Just one on liquidity. You ended the quarter with $586,000,000 of cash. And I was wondering if you could remind us how much of that cash is fully unencumbered? And then maybe related, sorry if I missed this, but how much has been spent or how much spend remains at Centurion to ultimately bring you to commercial production? Thanks very much.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

Yeah, thanks Nick. No concerns here. On the cash and the balance sheet, that total amount of cash and cash equivalents of about $586,000,000 is unrestricted, unencumbered and fully available to the company. You do see on our balance sheet a separate line item for restricted cash and collateral of about $850,000,000 Again, that primarily relates to all the pre funded of the reclamation liability across the globe. And then as far as Centurion capital for the South development, there's about another $100,000,000 in the second half of the year that will get us to Longwall production.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

Again, initial target on that was $489,000,000 I think if you add that $100,000,000 you might get to about $495,000,000 So, almost right on the dot.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

Great. Thanks so much for that Mark. That's really helpful. Maybe just on the restricted cash and collateral. Can you remind us, are there any relevant timelines we should be thinking about as far as unlocking some of that restricted cash? Just don't want to leave anything out there. Thanks.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

Yeah, there's about $520,000,000 of that is related to the surety agreement with our reclamation providers for future, our bonding providers for future reclamation. We have been able to reduce that amount over the last year, year and a half. And really that's done by continuing to do the reclamation work and getting bond releases. Beginning of the year, we talked about $100,000,000 reduction. So we've had some pretty good success there.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

Again, it's lumpy as that work gets done and as bond releases get approved. But we continue to knock that down.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

Got it. Okay, thank you again and continue best of luck.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

Thanks Nick.

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

Thanks Nick.

[Operator]

And this concludes today's question and answer session. I would now like to turn today's conference back over to Jim Greck for any closing remarks.

[Jim Grech, President and Chief Executive Officer at Peabody Energy]

Well, thank you, operator, and thanks to everyone for the time today. I also want to make sure I give recognition to our Peabody team, which amid everything else that's going on, we are again turning in record safety performance on track to beat last year's performance, which was the best in our one hundred and forty plus year history. So very appreciative of that. So we look forward to keeping all of you up to date on our progress as the year rolls on. Thank you.

[Operator]

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.

Participants

Executives

• Vic Svec, SVP, Global Investor and Corporate Relations
• Jim Grech, President and Chief Executive Officer
• Malcolm Roberts, Chief Marketing Officer
• Mark Spurbeck, EVP & CFO

Analysts

• George Eady, Analyst at UBS
• Chris LaFemina, Equity Research Analyst at Jefferies Financial Group
• Nick Giles, Senior Research Analyst at B.Riley Securities
• Katja Jancic, Metals & Mining Analyst at BMO Capital Markets
• Nathan Martin, Equity Research Analyst at The Benchmark Company LLC