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T1243

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  • Peabody: Better Thermal Coal Prospects, But Met Coal Market Remains Challenging [View article]
    While coal companies have been weathering a perfect storm in terms of demand, coal price and exchange rates, and just when they thought they are in the clear. It looks like another storm front brewing in the shape of higher US interest rates.

    In readiness for the extra cost cutting required, some mining companies are embarking re-engineering of their salary costs. Re-engineering being the re-naming of roles and asking incumbents to apply for the new named role. It just so happens the new role is in a slightly lower salary bracket. BHP (BMA) have already started the process, and many expect the others to follow.
    Mar 19 06:36 PM | Likes Like |Link to Comment
  • Peabody: Better Thermal Coal Prospects, But Met Coal Market Remains Challenging [View article]
    GO,
    Nice article. Please let me expand on Peabody's biggest business risk in this market.
    In this type of tight market, we need to differentiate between PCI and coking coals. Why...because when PCI can not find a sale, it gets sold off into the thermal coal market on its BTU value. The difference in today's market is about $15t. (Puts PCI back to around A$92t) If this happens, the BTU Australian operations are back in the red.
    You say...why would this happen? Well, East Coast Australia has a new port facility coming online in 2015 (Wiggins Island) with about 50% of the new export being PCI coals.
    What the coal industry needs right now is a good cyclone (Hurricane) to remind buyers not to take over supply situation for granted.
    Mar 7 04:51 PM | 2 Likes Like |Link to Comment
  • Peabody Energy: Why It Is Down 8% Year-To-Date [View article]
    PB,

    Good article. The big issue you did not mention is the FOREX risk on BTU Australian operations. Albeit I understand they are hedged, which could be a good or bad thing.

    T.
    Jan 21 01:46 PM | Likes Like |Link to Comment
  • I Remain Bullish On King Coal For 2014 [View article]
    EW,
    Your report is very US centric of course. However BTU US coal production is more like business base load. It is their Australian operations which will make serious money or keep the business bottoming along. Both scenarios driven by coal price and A$ exchange rate for coal into Asia.
    So to be bullish on BTU, one needs a view on revenue from China/Korea/Japan in A$ terms.
    Jan 7 03:23 PM | 1 Like Like |Link to Comment
  • Peabody Energy: With All Steps Taken, It's Time To Await Higher Coal Prices [View article]
    Gumby,

    Pleeeeese just give up on the firewood story. It just makes my head hurt.

    T.
    Jan 6 06:01 PM | 2 Likes Like |Link to Comment
  • Peabody - Strong Execution Remains Hidden As Coal Prices Remain Low [View article]
    While the US mines tinker along with a predictable margin given forward sales, the net result comes by in large from what happens in Australia.

    Margins are made or broken by the realized coal price in AUD terms. So there are two things to look out for;
    a. Movement in the coal price into Asia
    b. Movement in the USD/AUD exchange rate

    In my opinion we are more likely to see movement in the AUD than coal price.
    Oct 21 06:47 PM | 2 Likes Like |Link to Comment
  • Peabody Energy: A Chinese Ban On Coal-Fired Plants Could Impact Australian Operations [View article]
    Just to make it clear for everyone. US might on a good day produce 88% of the BTU coal by volume. But the revenue split is about 57% US and 43% AU. The margin split between the two is difficult to obtain, but because AU is mostly met coal, probably 45% US and 55% AU depending on the exchange rate.
    Oct 8 12:09 PM | Likes Like |Link to Comment
  • Diverse Global Portfolio The Game Changer For Peabody Energy In Tough Coal Industry [View article]
    Nice article, thanks.

    Only one other point worth a mention. While 43% of the revenue comes from Australian sales, Profitability of that 43% is subject to the AUD exchange rate.
    While US operations will tinker along at small margins, the Australian operations represent the biggest risk to profitability. More alarming is that it is largely out of their control.
    Pre financial crisis, the AUD would fall when commodity prices fall. This would provide a natural margin buffer, and to a large extent what made Australia attractive to BTU.
    The European crisis and US reserve printing of money has killed that margin buffer as Australia becomes a relative safe haven and one of only a few places one can get 4% return on a term deposit.
    So for the last 24 months, the AUD has detached from commodity correlation.
    I believe once the US stops attempts at devaluing the USD, the old margin buffer paradigm could well come back. BTU will be banking on it, as without it margins are screwed, along with most of the Australian mining industry.
    Oct 7 10:06 AM | Likes Like |Link to Comment
  • Peabody Energy: A Chinese Ban On Coal-Fired Plants Could Impact Australian Operations [View article]
    I am glad you used the term 'trash logic' as it saved me the trouble. US might constitute 88% of the coal by volume, but what % split do you think is the business risk? (profitability, loss and sensitivity)
    Sep 25 01:06 PM | Likes Like |Link to Comment
  • Peabody Energy: A Chinese Ban On Coal-Fired Plants Could Impact Australian Operations [View article]
    Actually when he said 'Super Cycle' he is actually referring to his Superannuation account. It should be peeking around now and time for him to bail.
    Sep 25 12:55 PM | Likes Like |Link to Comment
  • Coal Has Officially Bottomed: How To Play The Rebound [View article]
    What are you suggesting? Coal producers should be out there collecting firewood!
    Aug 15 01:27 PM | 2 Likes Like |Link to Comment
  • Coal Has Officially Bottomed: How To Play The Rebound [View article]
    While you are looking for $30, keep your eye out for flying pigs.
    Aug 14 10:59 PM | Likes Like |Link to Comment
  • Coal Has Officially Bottomed: How To Play The Rebound [View article]
    Mark was a frequent blogger on this forum and he saw himself as a coal expert. He got it all wrong on so many different levels. His comments were amusing mostly.
    Aug 14 10:58 PM | 1 Like Like |Link to Comment
  • Coal Has Officially Bottomed: How To Play The Rebound [View article]
    BTU slides are all about electricity generation and Thermal coal demand.
    Aug 13 02:36 PM | Likes Like |Link to Comment
  • Coal Has Officially Bottomed: How To Play The Rebound [View article]
    Thanks Steve for your article. Albeit a bit clunky and simplistic.

    I have a few comments to make; US coal sector bottom and Asia coal sector bottoms are not connected, neither are Met and thermal coal demands.

    In Asia coal price is actually not connected directly to demand, but more sentiment/panic. While there is no supply panic, prices will stay down regardless of consumption. This is because most mines are price takers, not makers.

    There are two types of coal sector investing;

    1. The large dividend generating investment like BTU, RIO, BHP
    2. The project based companies like CLR, BND, COK

    There is serious coin to be made in the project companies right now. I'm not so sure about the likes of BTU. I suspect it will bounce along the bottom for awhile until the AUD falls consistently below 90 cents.

    Word is out around town that BTU (Brisbane) are about to cut staff from 260 down to 160. A good part of that reduction will come from their projects space.

    Right now, given the dividend and potential margin growth, I think between $15 and $18 is about the right money for BTU. I am recommending to trade in that range, picking up 3% takes as often as possible.
    Aug 13 02:09 PM | 2 Likes Like |Link to Comment
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105 Comments
78 Likes