Like that young man named Arthur who removed a sword from the stone, some are simply born to rule. Within the kingdom of coal, Peabody Energy
Peabody turned in a terrific 61% surge in adjusted earnings per share atop a robust 21% revenue boost, reaching another new record mark of $2.01 billion for the second quarter. With prices for both thermal and metallurgical coal still hovering near record levels, Peabody logged its impressive profit expansion despite a slight dip in production volume from the prior-year period. I shudder to think how dramatically these metrics will improve once its exciting new pipeline of growth projects comes on-stream over the coming years.
The miner has put together quite an amazing string of announcements over recent weeks -- enough to require a quick review. A new agreement with China's Xinjiang provincial government brings a massive new mine with 50 million tons of annual thermal coal production capacity closer into view. That equates to 20% of the company's consolidated 2010 production volume! Earlier this month, the owner of Mongolia's world-class Tavan Tolgoi coal project selected Peabody Energy as a major stakeholder within a consortium of eager participants. In another important winning bid, Peabody acquired 220 million tons of reserves in the Powder River Basin that substantially enhances the profile of its existing Caballo mine.
And last, but not least, Peabody joined forces with steelmaker ArcelorMittal
In support of Peabody's ambitious growth profile, the company added further clarity and scope to its ongoing projections for a global supercycle for coal that remains in its early stages. The company's prior projections for the global coal industry were already plenty bullish for the industry's overall outlook, with expectations of 1.2 billion to 1.4 billion tons of incremental thermal coal demand, and 300 million tons of additional met coal demand over the next five years. Now, expanding that vision to a 10-year timeline, Peabody anticipates total growth in coal demand of 2 billion tons for thermal coal and 500 million tons for met coal. I am at a loss to convey the historic challenge that producers worldwide will encounter in meeting that incremental demand, or the enormousness of the resulting opportunity for long-term profit growth among the world's leading producers.
Less than one month ago, I added Arch Coal