America’s biggest coal miner joins sector’s comeback in US

Bloomberg

Peabody Energy Corp., America’s biggest coal miner, is back. After almost a year in bankruptcy, the St. Louis-based giant will trade yet again on the New York Stock Exchange on Tuesday. Clarksons Platou Securities Inc. estimated a market capitalization of $3.97 billion for the company, which at its height was valued at almost $24 billion. Its return to Wall Street comes just as the entire US coal sector is staging a comeback amid growing interest from investors.
Rival Arch Coal Inc. emerged from bankruptcy in October. Miner Ramaco Resources Inc. held the industry’s first initial public offering in two years. And Warrior Met Coal LLC is planning its own. They’re all riding a rally in coal prices, which skyrocketed last year after China decided to cut its output. US natural gas futures have meanwhile climbed, making coal a more attractive alternative for power generators, and President Donald Trump is rolling back regulations on the industry, vowing to bring mining jobs back.
“We look forward to this next phase in our company’s history,” Peabody Chief Executive Officer Glenn Kellow said in a statement Monday. “Coal remains an essential part of the energy mix, and Peabody is the largest US coal producer.” The industry’s recovering from a market collapse that, just a year ago, sent coal prices plunging to their lowest level in over a decade. The downturn forced shut hundreds of US mines, leaving thousands out of work. Peabody, the largest US coal miner by tonnage, is returning with about a quarter of its old debt levels and plans to focus on the thermal coal used by power plants — a fuel it can extract from mines in Wyoming and Australia that analysts including Clarksons Platou have ranked among the world’s lowest-cost operations.
The miner may chart a conservative path forward, focusing on keeping debt levels low and staying profitable, Jeremy Sussman, an analyst at Clarksons, said in a note. That means avoiding decisions like a 2011 one to spend $4 billion to acquire Australia’s MacArthur Coal Ltd., an ill-timed, debt-fueled bet that metallurgical coal prices would stay high. Prices promptly crashed, ultimately driving Peabody into bankruptcy.
“The Bruce Springsteen classic Glory Days, ode to ‘boring stories of glory days,’ is appropriate for how investors should view Peabody,” Sussman said in a March 30 note. “Peabody has traditionally been thought of as the bellwether of the coal space, the largest and most diversified non-Chinese coal player, built to withstand almost all market conditions.” US coal production plunged by almost 40 percent under President Barack Obama as the industry faced competition from cheap gas and pressure from tighter regulations on pollution from power plants.