Long-term coal super-cycle coming: Boyce

A PEABODY Energy executive spoke of a favorable global outlook for long-term supply and demand amid an approaching “super-cycle”, while also outlining some of the company’s Asia-Pacific growth projects during a recent investor conference.
Long-term coal super-cycle coming: Boyce Long-term coal super-cycle coming: Boyce Long-term coal super-cycle coming: Boyce Long-term coal super-cycle coming: Boyce Long-term coal super-cycle coming: Boyce

Peabody chief Gregory Boyce

Donna Schmidt

Chairman Gregory Boyce and other senior executives presented last week at the 2010 Analyst and Investor Forum in New York, where the company’s strong position to create significant growth amid the brighter outlook was highlighted.

"I believe we are in the early stages of a long-term super-cycle for coal,” Boyce said.

“Peabody, with its unmatched asset base, market positions and growth projects, is uniquely positioned to capitalize on this sustained trend.

Coal, he noted, has been the fast-growing fuel in the world over the past decade, beating out natural gas, hydro power and oil consumption globally.

The nearly 50% expansion in the decade reflects not only coal’s stable cost and abundance, but also the international appetite for the resource.

“Asia-Pacific nations are leading a historic global build-out in coal-fueled electricity generation,” Boyce said, pointing out that more than 94 gigawatts of new generation would come online this year, a figure representing 375 million tonnes of consumption.

Against that strong market backdrop, the producer has plans to expand in high-growth regions where volumes, pricing and margins all lend themselves to opportunities for the company.

One of those areas is the Pacific Rim, where Peabody’s Australia platform is helping to progress projects to double met and thermal coal exports by 2014. It is targeting 35Mt to 40Mt of production there, subject to Australia’s investment climate.

The company also has sights set on top coal-consuming China, where it has several projects and joint ventures in various stages up to and including active construction. It is also exploring opportunities in India, Indonesia and Mongolia.

Peabody president Rick Navarre then outlined for the financial-focused audience the company’s multi-pronged Asian growth platform plan, under which it intends to reach a 100Mtpa goal long-term.

Increased Australian operations exports, expanded coal trading, coal conversion/clean coal project participation, active production via joint ventures, and a Mongolian export base development are all part of the company’s plan.

"We expect global seaborne markets could be some 100 million tons short of coal by 2015 as emerging economies, led by China and India, achieve growth rates that are two to three times that of developed nations," Navarre said.

"Peabody has the resources and capabilities to fill this gap in the fastest-growing markets of Asia by capitalizing on our advantages: open-cut mining expertise; a strong safety and operating track record; and deep engineering, project management and trading capabilities.

“Through our Asia 100 Vision, we look forward to turning prospects to projects to results as the decade progresses."

Looking inward to its US portfolio, Peabody announced that operations at the new Bear Run complex in Indiana have begun. The surface operation is targeting 8Mtpa by 2012, and potentially 12Mtpa of capacity with additional investment.

Navarre updated progress on the new El Segundo mine in New Mexico as well. The large North Antelope Rochelle surface mine is also on its way to shipping 100Mtpa or more this year.

As Peabody heads into the second half of 2010, Boyce said that financial results for the year could rival those of 2008 that set records for the company.

"We're surprised at Peabody's current valuation, which prices British thermal unit (BTU) similar to small regional producers at late-cycle multiples, as opposed to an expanding global leader serving the fastest-growth markets in the world," Boyce said.

"BTU is positioned for extraordinary growth ... and we look forward to creating extraordinary value."

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