Peabody Energy (BTU) is the world's largest publicly traded coal company and controls 9 billion tons of coal reserves. According to S&P, Peabody's coal fuels about 10% of all electricity generated in the United States. If that statistic isn't impressive enough, consider this: 2% of the electricity generated in the entire world comes from the company's coal.
Despite its assets 'down-under', "almost 79% of the 245.9 million short tons the company sold last year" (Areddy) came from U.S. mines. Lately however, Peabody has diversified in a major way. Recently, the company secured a 24% stake in Mongolia's Tavan Tolgoi coal mine, "one of the world's largest unexplored reserves of coking coal." (Venkat) Perhaps more significantly, Peabody has announced that it "will pursue a giant coal-mine project in China's western Xinjiang region...[that is expected to] produce some 50 million metric tons of coal annually...[roughly] half the 105.8 million short tons that Peabody last year sold from its flagship North Antelope Rochelle thermal-coal mine in Wyoming." (Areddy)
All this is in addition to an ongoing bid by Peabody and Arcelor-Mittal (NYSE:MT) for Australian miner Macarthur Coal Ltd (OTC:MACDF) which, if completed, would significantly expand Peabody's Australian operations. The company is also valued attractively. At a recent price of $42.91, BTU is trading at just 9.62 times analysts' estimate of $4.46 per share in 2011. Like most stocks, Peabody has taken a beating in the past month and the shares look extremely cheap at current levels.
- Areddy, James T. and Simon Hall. "Peabody Goes Deep in China." The Wall Street Journal. 15, July 2011
- Denning, Liam. "Tapping Into America's Newfound Energy." The Wall Street Journal. 6 July, 2011: C26.
- Kebede, Rebekah and Michael Taylor. (2011, May 30). China Coal Imports to Double in 2015, India Close Behind. Reuters.com. Retrieved July 16, 2011.
- Venkat, P.R. and Gurdeep Singh. "Mongolia Taps U.S. Miner." The Wall Street Journal. 6 July, 2011: B3.
- S&P Stock Reports: BTU
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.