"The seam lies underground. Three million years of pressure packed it down." -- Sting, "We Work the Black Seam"

OK, I admit that's a depressing song to use as an intro to a coal-mining story, but it's kinda tough to find a bright and cheery coal-mining song. In any case, there's nothing to be depressed about with respect to PeabodyEnergy's (NYSE:BTU) first quarter.

Shipping 14% more coal for the quarter, Peabody saw revenue rise 40% to $1.08 billion. Pricing for the company's ultra-low-sulfur Powder River coal was pretty strong, up 12%, and Peabody is on target to ship 130 million tons from the Powder River area in 2005.

Measured on a per-ton basis, operating costs in the United States were slightly lower than in the fourth quarter and only about 6% higher on an annual basis. Australian costs were up much more (13% sequentially, 68% annually), but revenue per ton in Australia was also higher (up 8% sequentially, 73% annually). On a blended basis, operating profit per ton was down one cent from the fourth quarter and up 83% annually.

Translating this into understandable numbers, operating profit climbed 108% to nearly $81 million, and net income rose 130% to nearly $62 million.

As those numbers would suggest, the market for metallurgical and thermal coal is very strong. Exports of metallurgical coal to China are expected to grow by double digits in 2005, and record prices for emissions allowances are fueling higher prices for the company's Powder River coal.

Though management acknowledges that these conditions are the best they've ever seen, they aren't calling a top just yet. Coal inventories remain very low despite a mild winter, and economic growth will almost certainly lead to further demand (and higher prices) for coal. What's more, the high price of oil and natural gas is leading to growing interest in coal gasification/liquefaction, which, of course, consumes even more coal.

Looking ahead, there's a lot to like about Peabody Energy. The company recently purchased 950 million tons of ultra-low-sulfur reserves and is the leading player in Powder River coal. What's more, the company is increasing its marketing efforts in China and will likely pursue the same in India before too long.

I know that the market for coal will slow down someday, but I have no idea when that day will arrive. At present, coal miners like Peabody continue to raise their guidance, and the market price for coal continues to rise without any real inventory buildups. I would agree that the easy money has already been made in the coal cycle, but utilities seem genuinely concerned about their coal supplies, and that suggests to me that there could be some life left in this bull cycle yet.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).