Peabody Energy Corporation

Good day and welcome to the Peabody Quarter 4 2025 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on a touch-tone phone. To withdraw your question, please press star then 2. Please note that this event is being recorded. I would now like to turn the conference over to Kayla Finkling, Director of Investor Relations. Please go ahead.

Thanks, Operator, and good morning, everyone. We appreciate you joining us for Peabody's fourth quarter and full year 2025 earnings call. Joining me today are Peabody's President and CEO, Jim Grech, Chief Financial Officer, Mark Spurbeck, and Chief Commercial Officer, Malcolm Roberts. After our prepared remarks, we will open up the call for questions. Before we begin, I want to remind you that our remarks today will include forward-looking statements. Please review the full statement contained in our earnings release and consider the risk factors referenced there, along with our filings with the SEC. I'll now turn the call over to Jim.

Thanks, Kayla, and good morning, everyone. I couldn't be more proud of the work of our Peabody team, which turned in an excellent quarter and year that was marked by a number of achievements. We are also seeing improving market fundamentals and have a full agenda of priorities for the new year. Safety always comes first at our operations, and we turned in another record safety year with an incident rate of 0.71 for 200,000 hours worked. That's 12% better than our prior all-time record set just a year ago. It is still safer to work in a Peabody coal mine than a grocery store or shopping mall based on national incident rates. Peabody also prides itself on environmental excellence, as witnessed in 2025, where we reclaimed twice as many acres as we disturbed. This allows us to shrink our footprint and reduce our financial obligations over time. We also tied our all-time record low for environmental notices of violation. Operationally and financially, the quarter was right down the fairway in meeting or surpassing expectations across key metrics. Mark will cover these results in more detail in a few minutes. I'm pleased to announce that I was in Australia last week, where the team was installing the very last shield and putting the finishing touches on the Centurion mine in advance of starting long-wall mining, well ahead of its original schedule. I have to say, the culture that had been built at Centurion is outstanding, and our team is charged up and has started mining some of the best metallurgical coal in the world. Let me remind you of some of the extensive benefits Centurion has on the Peabody portfolio. First, Centurion is expected to ship an average of 4.7 million tons per year of premium hard coking coal in a world that we remain convinced is structurally short of that product over time. We expect the mine to deliver 3.5 million tons in 2026, ramping up to that 4.7 mark by 2028. Second, Centurion's product is of the highest quality and coupled with proximity to key demand nodes in Asia, results in full benchmark pricing. Our realizations across our entire met coal segment are expected to increase from 70% of the recognized benchmark in 2025 to 80% this year. And as volumes ramp to 4.7 million tons, we expect it will further exceed that 80%. Third, This mine is a long-lived asset. Combined with the Wardswell acquisition in 2024 that allows significant development to the north, Centurion accesses the coveted Guniella middle seam and is expected to have a mine life of 25 plus years with an integrated mine plan of 140 million tons. Finally, we've previously reported a net present value for the project of $1.6 billion with all-in costs of $105 per short ton in 2024 at an average benchmark price of $210 per metric ton. A level we are already above today. Our latest assessment of this Centurion alone represents an NPV of $2.1 billion at $225 benchmark pricing. So top realizations with full benchmark pricing, low cost, and a long mine life. Centurion is truly the cornerstone asset on our strategy to maximize long-term shareholder value. and to intentionally reweight our portfolio toward higher margin metallurgical coal. This event marks the culmination of years of disciplined strategic investment and a position centering to deliver the scale, cost performance, and premium product quality needed to meet the growing global demand for high-grade steelmaking coal. Also during the quarter, we continued to make good progress in our asset optimization activities. Here our goal is straightforward. Our Peabody Development Division is tasked with evaluating our vast land and mineral holdings to maximize our long-term earnings and cash flow potential from these assets. Actions include our work to locate renewable projects and formerly mined lands, notably in the United States with R3 renewables. We're also working on Australia at the Centurion mine, developing a gas power station to convert waste gas to electricity, starting at 5 megawatts and expanding to 20 megawatts. Activities also include a small plant facility to capture coal seam gas that will then be converted into LNG. During the fourth quarter, Peabody Development advanced activities in several developing areas. First, we conducted additional work to assess the rare earth and critical mineral potential at our U.S. mines, with extensive testing conducted at our PRB mines. Second, we held initial discussions with government officials and private partners regarding the siting of power plants that would make use of Peabody's extensive U.S. coal reserves. And third, we are working with the Trump administration to increase U.S. coal exports from the West Coast to the growing Asian coal markets. Earlier this week, I had the opportunity to participate in the CSIF-sponsored event, Securing Critical Mineral Supply, a Government-Industry Dialogue. held in partnership with the Critical Minerals Ministerial and the Trump administration. I want to express our appreciation to the White House National Energy Dominance Council and Department of Energy for including us in this dialogue. This discussion underscored the growing national focus on strengthening domestic critical mineral supply chains and the important role US companies can play in that effort. We were pleased to contribute our perspective particularly as we continue to evaluate opportunities where Peabody's assets, expertise and partnerships may support emerging critical mineral initiatives. We look forward to continuing engagement as the federal government and industry work together to address strategic supply chain challenges. Regarding Peabody's progress in pursuing opportunities with rare earth and critical minerals, let me share where we are at at this stage. Peabody has conducted a robust critical mineral testing program since the middle of last year, in excess of 800 samples from the PRV alone. In addition to the standard array of light rare earth elements, our assessments to date have uncovered promising concentrations of heavy rare earths and other critical minerals. We encouraged by the presence of heavy rare earths, which account for an estimated 21 to 28% of the critical mineral oxide concentrations. I would also note the targeted concentrations of germanium and gallium in select locations show good potential. In addition to our testing program, Peabody is developing flow sheets with multiple third parties to support the technical and economic assessments, as well as the ultimate production of rare earth products. Peabody is also continuing to work with government agencies at the state and federal level. We were pleased to be recommended to receive funding of a $6.25 million grant by the Wyoming Energy Authority for a pilot processing plant in the state. The application now goes through a public comment period before consideration by the governor later this month. At this time, we are taking an options based approach using multiple feedstock locations and process partners. We do so to expand our opportunities for success and potentially accelerate time to market. These are still early days in our rare earth and critical mineral journey. We are sufficiently encouraged to continue our progress here to further evaluate the commercial potential. We look forward to sharing more detail as this work reaches appropriate milestones. Turning to energy policy, several weeks ago, I was honored to be appointed by the US Secretary of Energy to chair the newly reconstituted National Coal Council. Key priority of the NCC will be to advise the administration on ways to expand use of coal fuel generation, build new coal plants, and export greater quantities of US coal. Why should coal be central to any discussion of US energy policy? Coal is, quite simply, America's largest energy asset. More than that, America has more energy in its coal than any nation has in any one energy source. More energy than Saudi Arabia has in its oil, more energy than Russia has in its natural gas. We'd be irresponsible to not use this unique asset for the benefit of the American people. It's clear that Peabody is at the intersection of multiple policy and market trends, both structural and cyclical, that are moving in a highly favorable direction. To set the stage for our market discussion, I'll note that the International Energy Agency recently came out with their annual coal report. 2025, once again, set an all-time record for global coal use at 8.8 billion metric tons. That means that world coal use has nearly doubled in the 25 years since the new century started, as nations pulled people from poverty, urbanized, and electrified, a trend that continues today. This occurs at a time when U.S. winter entered a deep freeze, and unsurprisingly to us, coal moved to the top of the dispatch list on many of the most extreme days. Renewables are largely unavailable in multiple regions, and natural gas prices more than doubled in just one week, as utilities were forced to compete with residential customers and businesses at their most vulnerable times. Not so with coal plants, which can stockpile months of fuel supplies and face nowhere close to the price volatility and surges of some other forms of energy. Peabody is seeing substantial strength in the markets for both domestic thermal and seaborne metallurgical coal markets. For more on supply and demand dynamics, I'll turn things over to our Chief Commercial Officer, Malcolm Roberts.