Peabody, which reported 21% higher revenues for the quarter year-on-year of $US2.01 billion, is enjoying strong prices for its export coal from its Queensland operations and will look for further acquisitions to increase its presence in Asia, chairman and chief executive officer Gregory Boyce says.
"Peabody once again delivered substantial increases in revenues, EBITDA [earnings before interest, taxes, depreciation and amortisation], operating profit and earnings over the prior year, and we expect an even stronger second half," he said.
"Peabody also is leveraging our unique access to the strongest global markets as we look to expand our Australia platform through organic growth and acquisitions, participate in the Mongolian Tavan Tolgoi development and partner in potential development of one of China's largest coal mines."
He said Pacific Rim growth continued to lead coal through the early stages of a demand “supercycle”, bolstering Australian metallurgical and thermal coal demand and pricing that continued to be near record highs.
"Seaborne demand is further strengthened by rising needs in the Atlantic market where coal is required to backfill for declining nuclear use in Europe," Boyce said.
Electricity generation has risen 14% year to date in China and 8% in India, driving similar increases in thermal coal use.
World steel output has increased 8% year to date, which would equate to an additional 70-80 million tonnes of additional metallurgical coal demand throughout 2011.
Peabody president Rick Navarre told analysts he expected the company to complete due diligence of Macarthur by next week and was confident Peabody and its joint venture bidding partner ArcelorMittall would succeed in acquiring the Queensland pulverised coal injection producer.
"I think it is just a good fit for us to work together," Reuters reported Navarre as saying of the collaboration with ArcelorMittall.
"As it relates to Macarthur, they are already a 16 per cent shareholder [so] it bolsters our chances very significantly of being very successful on this bid.
"We only need to get 50 per cent of the shareholders to take control of Macarthur and we start with 16 per cent, meaning we really have to get another 34 per cent, which is about 60 per cent of the free float that is available," he reportedly said.
Navarre said it made sense to partner with ArcelorMittal – the world's largest steelmaker – to acquire more reserves of metallurgical or coking coal, a key raw material for steel manufacture.
"Obviously there is a shortage of coking coal around the globe and I think it is just a natural fit between Peabody [and ArcelorMittal] as we expand our position in coking coal [and] as they continue to try to lock in secure supply," Reuters quoted him as saying.
Peabody continues to target total 2011 sales of 245-265Mt including 28-30Mt from Australia, 195-205Mt from the United States and the remainder from trading and brokerage activities.
In its major Australian mine expansions, the company continued construction on the preparation plant addition at Wilpinjong Mine in New South Wales, where project completion is expected in the fourth quarter.
It also progressed permitting for the Millennium Mine in advance of construction later this year and continued overburden removal at the Burton Mine expansion in Queensland.
It continued advanced open cut expansion at the Wambo Mine and continued slope development and paste plant construction at the Metropolitan Mine in NSW.
The company is targeting 35-40Mt of Australian capacity by 2014-15, including 12-15Mt of metallurgical coal capacity and 15-17Mt of export thermal coal capacity.
Peabody has also agreed to acquire the remaining 5% interest in the Burton Mine for $A35 million, from Thiess Investments.
Elsewhere in the Asia Pacific, Peabody was named by the Mongolian government as a member of the final consortium for potential development of Tavan Tolgoi, one of the largest untapped metallurgical coal reserves in the world.
The consortium and the Mongolian government are advancing negotiations regarding the operational structure and terms.
Peabody has also announced an agreement with the government of China's Xinjiang province to pursue development of a 50Mtpa surface mine.