Wyoming coal heavyweights double down on out-of-state metallurgic mines

Wyoming’s two largest coal producers, Peabody Energy and Arch Resources, separately made moves recently to shift their focus away from the state’s thermal coal used to generate electricity to the metallurgic variety that’s mined elsewhere and used in steelmaking.

Combined, the companies’ five Wyoming coal mines accounted for more than 63% of the state’s coal production in 2023, according to federal data compiled by the Wyoming State Geological Survey. The coal industry has long served as an economic backbone to Wyoming’s economy, although that role is shrinking.

Though Peabody, Arch and other companies involved in the actions didn’t provide many specifics about the implications for Wyoming mining operations, one industry analyst says the moves should help shore up their financial positions and provide clearer predictions for Powder River Basin coal production, which will likely continue its downward trend but not disappear imminently.

Corporate moves

Arch, which operates the Black Thunder and Coal Creek mines in the Powder River Basin, will enter an “all-stock merger” with CONSOL Energy to create Core Natural Resources, according to the companies. Combined, the new company will operate 11 mines and maintain CONSOL’s interest in and access to coal terminals for overseas exports — which mostly serve steelmaking customers.

Pending regulatory approval, the companies will form Core Natural Resources in early 2025.

Also this month, hedge fund Thomist Capital Management notified the U.S. Securities and Exchange Commission that it has acquired a nearly 10% stake in Peabody Energy. As a significant shareholder, Thomist reported to the SEC that it wants Peabody — among other things — to use the cash injection to focus on “unlocking value” in its Powder River Basin operations “to free up cash flow for shareholder returns.”

That could mean, according to University of Wyoming energy economist Rob Godby, cutting back on capital expenditures in Wyoming to continue its trend of focusing on non-Wyoming metallurgic coal. But, Godby added, it could also signal a sort of holding pattern here to secure a “last mine standing” status in the higher-quality southern Powder River Basin, where Arch may be willing to sell its hallmark thermal asset — the Black Thunder mine — or close shop in Wyoming completely, ceding the nation’s largest thermal coal market to Peabody.

Wyoming coal “is not going to leave tomorrow,” Godby said. “So, Peabody can slot right in there, and it looks like Arch is willing to give that space up.”

What it means

“It makes sense,” Godby told WyoFile.

There’s been a reckoning in the U.S. utility market that increasing electrical demand driven by booming data and artificial intelligence computational centers has given at least a short-term boost for cheap, thermal coal power — despite myriad federal regulatory moves against the industry. In short, Godby said, Wyoming’s Powder River Basin has for a long time had too many coal producers competing for a shrinking thermal coal market. If Arch is willing to bow out, Peabody is in a strengthened position to keep southern Powder River Basin coal flowing.

Both Arch and Peabody stocks ticked upward last week after the news broke, suggesting a positive response to focusing on metallurgic coal markets rather than Wyoming’s thermal coal market.

“It might suggest that Peabody is the eventual last man standing,” Godby said. “At least in the southern Powder River Basin. There would be a market, for as long as that market exists.”

Godby added that Wyoming’s thermal coal industry — based on escalating demand for data and AI, “may have longer legs than people have credited for.”

Combined, Arch’s Black Thunder and Coal Creek mines shipped about 63 million tons to U.S. customers in 2023, according to federal data. Peabody Energy’s North Antelope Rochelle, Caballo and Rawhide mines shipped a combined 87.1 million tons.
Arch and Peabody proposed a merger several years ago, but the U.S. Federal Trade Commission blocked the deal based on antitrust concerns raised by U.S. utilities.

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