Yet Another Value Podcast - Matt Warder talks coal markets: how does coal morph into AI play, election, $BTU, $CEIX $ARCH merger

Episode Date: September 26, 2024

Matt Warder, @mfwarder on Twitter/X, is back on the podcast to discuss all things Coal, including: overall thoughts on coal at this point September 2024, vision for coal with AI, met coal, upcoming election, Peabody $BTU 13D, $CEIX $ARCH merger and more! You can Follow Matt Warder on Twitter/X @mfwarder: https://twitter.com/mfwarder Matt Warder's first appearance on YAVP: https://www.youtube.com/watch?v=DF0uGS4swLM Chapters: [0:00] Introduction + Episode sponsor: Tegus [2:31] Where we are in the overall coal market [4:38] Coal for AI overview [12:18] Overall supply/demand for Metallurgical "met" coal [17:35] How does the election affect coal market [21:31] Vision for Coal and AI, how does coal morph into an AI play [30:26] AI arms race and building AI data centers, timeline to building this AI / Coal power play and how should folks think about new coal plants in America [35:21] Final thoughts on AI and Coal [38:31] Peabody $BTU 13D [46:40] Peabody and Consol Energy / Arch Resource merger conference calls; why are management communicating this way [49:16] Insider ownership in Coal stocks [55:37] Other levers that could be pulled to unlock value in PRB [59:38] How to think about met coal stocks right now and their performance [1:03:21] $BTU corporate action ideas [1:05:45] Comments on $CEIX $ARCH merger Episode sponsor: Tegus If you’ve been reading my newsletters, you know how often I rely on Tegus for my research. It’s truly revolutionized how I get up to speed on new industries and companies. Tegus has the largest transcript library in the world, with over 75% of private market transcripts. Whether you’re curious about AI, biotech, or any niche market, Tegus has the insights you need. What sets Tegus apart is its all-in-one platform. It’s packed with expert call transcripts, management checks, panel calls, and in-depth financial data. No more jumping between different services or piecing together fragmented data. With Tegus, everything is right at your fingertips. The best part? The insights you get are from the very people shaping the industries you’re interested in. You’ll find perspectives from insiders and executives that you simply can’t get anywhere else. To see Tegus in action and understand why it’s my go-to resource, visit Tegus.com/value – that’s T-E-G-U-S dot com slash value. Trust me, once you try Tegus, you’ll never look back.

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If you like this podcast, would mean a lot if you could rate, subscribe, review, wherever you're watching or listening to it with me today i'm happy to have on for the second time the godfather of coal matt water matt how's it going it's going great andrew thanks for having me on again and you know love love talking about coal at all points and times uh you know it's been a pretty rough few months from met but uh there there's a lot of interesting things that are starting to permeate on the thermal side uh which you know have once again kind of pushed uh push some of these companies into the headlines. So love to get into with you and then go down that rabbit. Well, I've been excited since we decided a few weeks ago to do this. Let's get there in a second,

but before we get started, just want to remind everyone, quick disclaimer. Nothing on this podcast is investing in advice. That's always true, maybe particularly true today because Matt and I are going to bounce through the entire whole space. So, you know, there's like, there's a thousand companies there, but there's five to ten. And I'll add in a disclaimer, I have a small position in Peabody, the ticker there is BTU. I'm longed that. So I'm, I'm, I know for sure that's going to come at some point. So there's your disclaimer. Please consult a financial advisor, do your own work, all that type of stuff.

Matt, there's so much I want to talk to you about that's going on in the coal space. I'm pulling up my notes over here. I want to talk about a bunch of different things, but I guess the place to start. You and I are recording this September 18th. We're recording this as the Fed is coming out with the 50 basis point. But I just want to start by asking, as you and I sit here, September 18th, where do you think we are? are in, you know, just the overall coal market? How are you thinking about coal today?

All right. Well, I mean, you know, when last I was on your pod, we talked about, you know, the, the long-term thesis is there's not enough high-quality material to provide to either the power industry or the steel industry. And largely, that thesis remains unchanged. You know, short-term can do a lot to sentiment, but, you know, short-term also has, you know, very little effect on what's going to happen 10 years from it. So, yeah, with regard to the long-term thesis, that's still intact.

We've had, you know, kind of a reversal of what I sort of suspected fortunes would be for this year in that thermal coal has actually done really well over the summer. Price has been very resilient, you know, companies that have been selling a console in particular. He just went through a merger, is going through a merger with Arch, had a really fantastic second quarter set up for a strong back half of the year. Meanwhile, net buyers have not exited shoulder season yet. So they stopped buying in February, March, and the prices just march steadily, steadily downward,

down below 200. And now all of a sudden, producers are finding, you know, flexibility in their costs. And rail providers in the U.S. are being more responsive. So now there's a bit of a reshuffle around that space. As we head into what is normally shoulder season for thermal coal, we should see power demand begin to fall off here in the next few months. We should see thermal coal prices begin to come down.

That's sort of what we're seeing right now. But, you know, again, just the long-term demand picture for both keeps picking up really strangely, and especially so, as we just mentioned, on the thermal coal side. So I think the reason you and I talked and started getting ready for this podcast is we wanted to talk about coal for AI. And I think there are two ways we can talk about that. You know, you could talk about literally building coal, clean coal, carbon zero coal plants and using those power AI plants. That's one. We'll get there in a second.

But as we're talking just about the overall coal market, I want to ask you said, thermal coal prices have surprised. The demand has surprised. We haven't really hit a shoulder. And I'm going to ask, you know, the last time we talked was kind of before the big AI boom. Obviously, Invedia, stock price always goes up. But it was before you really started seeing all the AI guys go, oh, how is what we need. That's where the shortage on the AI, it was, I think it was right when the Amazon deal with Tallinn right outside that nuke was announced, and then you saw a string of deals where

just all these AI guys are saying, we are desperate for power. So I just want to ask, as we sit here mid-September, you know, we'll take coal powering eye plants later, but just is that demand for power? Is that starting to impact like the short term, Thelmore Cole? You know, even if AI today doesn't want it, if they're taking all the new power, somebody's got to power everything else, is that really starting to play out for Cole at all? Yes, and those is a short answer.

Yes, we've already sort of kicked the can down the road with regard to, I think, plant retirements. So, you know, Homer City, you know, and PJM had come off last year. I think that's probably the last one we're going to see for a little bit, just because the necessary reality of increasing power demand is that you have to draw from your baseload, you know, more heavily than you did in, years prior. And, you know, the entire energy crisis was built around, you know, this notion that you could swap out, you know, baseload capacity for intermittent capacity. And then, of course, we had,

you know, historic brownouts and blackouts in Texas in the middle of winter and all those sorts of things. And that started to show kind of the cracks in the armor with regard to that argument, so to speak. So now I think it's a little bit more accepted, even amongst, you know, the more progressive crowds I tend to talk to in D.C. that, okay, well, we do need to have some sort of base load, you know, capacity. We need to be able to kick these plant retirements out a little bit because the, you know, the data center power demand build out is just, it's too much for our existing grid to deal with at the moment.

So we have to be able to make concessions for it. There are a couple of ways to do it. You can co-locate a facility, you know, next to a data center, you know, be that solar and wind, you can offset a little bit of it. But you've got to kind of do it at the corporate development. And so now that's escalated up to, well, let's maybe consider, you know, grid-level plants to do some kind of behind-the-meter agreement with these data centers. And, you know, to date, they've been talking about, you know, I mean, they mostly put them near population centers, right? Because latency with regard to data is an issue.

And also, you know, the states and cities themselves are obviously going to say, sure, come build it over here and bring its jobs. Of course, they're going to save them. So they're saying it now, but if you see some of the states that have said this, I remember Washington, they're saying, oh my God, we don't like it. Like, they run, they take up so much power. There's a constant buzzing noise. You know, you've got, they're, they're not pretty. It's basically a big cement block out there. Like, I do think they're starting to re-evaluate that just a little bit, but, you know, competition for jobs being what it is that people probably end up living with it. Yeah, I think that's kind of how it's gone. But obviously, that's had a huge

impact on localized power prices. And so it's been the ratepayers who's really been punished for that sort of, it's not necessarily an error in judgment of location. I think it's best practice probably, you know, for those data centers as they exist here at the moment. But, you know, power prices have gone way up. And, you know, to the point where this is, you know, this is going to become kind of a cottage industry, I think, for, you know, a lot of, you know, power plants that have been

hydro and some power technologies have been left for dead a long time ago. But the bottom line is if we're going to grow at this pace and if we think about it from a national security perspective, it would behoove us not to win the AI race relative to China. Because there's a lot of problems that we can throw AI at that AI could solve for us, you know, just for starters. But if that's going to be the case,

we need to sort of create some alternative scenarios or start thinking outside of the box with regard to where that power is going to come from until battery storage gets here, knock on wood in 20, 30, 40 years, who knows? When you talk to coal players, especially the thermal coal players, are they saying that?

Are they saying, hey, there were some plants that we thought might be getting retired, going offline, but now just because of this enormous demand, they're not only not retired, like they're coming back, they're thinking, I don't think I've seen any coal, growth stories, but are they kind of starting to hear their buyers say, hey, we're going to be here in 25, we're going to be here in 26, maybe before it was a question mark? To some extent,

you know, this, I spoke at a conference in Myrtle Beach earlier in the summer. And let's just say that that is the first time in, you know, it's probably since the start of my career that I've heard the words, we might see another coal plant kid built. And what about Long Beach? Wasn't Longview of one in 2015 or so? I mean, that's right in my back of the neck of the woods, you know, in Morgantown, West Virginia. And yeah, that was one of the last few.

And of course, it's running all natural gas right now. Oh, I haven't followed the story. So, yeah. Much as life on those kinds of things. But we're here, you know, is the bottom line. We're here at this point where baseload demand has to increase and we have to have some difficult and maybe creative conversations

about how we can quell that demand going forward. And, you know, one of the things that we've never really taken seriously, I think, as a culture, has been carbon capture and sequestration, which, you know, at least from an intellectual standpoint, would be the easiest thing to do, provided you had the technology to capture it. And, you know, the Inflation Reduction Act put in these, you know, these... 45Q, I think, credits is what would apply to carbon emissions.

and nobody's really done much with them until here now because we're forced into this position to actually look under all the stones to see to see what's going to work and honestly you know carbon capture and sequestration I think if you put it in the right place with the right types of facilities with the right political environment you probably can get something done and then of course the end of Chevron deference this year means that a lot of those sort of top level regulatory decisions which would have been reserved for the federal government have now been kicked back to the states and so we have a kind of multilateral political environment nationally for this than we would have otherwise

and there are some exceptions to that I think the Clean Water Rule Clean Water Act is one of them there are probably some others I'm not a legal expert by any means but I do think it provides us a chance to, it opens the door to some possibilities that weren't there before, which is kind of why we started talking about doing this podcast. Let me just go two more things on the broad coal, just sector in general, and then I want to start digging and say, you mentioned Matt, you know, again, we're talking in the Fed,

just cut rates by 50 basis points. I think people look at Met and everything and they worry about the near-term demand, right? I haven't followed the U.S. Steel thing too closely, but it's been pretty clear. U.S. Steel said, hey, if you don't let us sell to, if you don't let us sell, there's going to be some plant closures. China is really slowing down over there. Obviously, that doesn't impact when you talk about the long-term, hey, the demand's going to be there. We don't have the supply on the coal side. That doesn't impact the long-term. But I think people look at the short term and they say, oh, you know, if I'm looking at something that's got a lot of met exposure, the short term the demand side might not look too good.

So I'd love to get your thoughts just on the overall supply demand of met right now. Sure. So, I mean, there's another way to say that. China steel market stinks fully and completely. I was actually working on a piece here this morning that talks about China demand. There's one comment that came out in a fast markets article that, you know, but there will be no golden, you know, September or silver October for the steel industry in China this year, just because stockpiles are really high.

Real estate demand is absolutely in the toilet, and those dynamics are unlikely to resolve here anytime soon. In addition to that, there have been trade cases, you know, brought against China by Vietnam, Turkey, Canada, I think, in a couple of other countries that are reducing the ability to that offload, you know, this blood of steel that they have. So it's really echoes of, you know, back when I first became steel analyst, 2014, 2013 era, you know, we went into this period where China dumped a lot of boron added steel, a lot of lower quality material into the market.

You know, that took about 12 to 18 months for all the trade cases to come on, and the entire commodity sector absolutely collapsed, you know, was led by oil. And steel had already sort of begun. to pull out of it. There's actually steel that kind of brought everything out of that melee back in 2016. So I think, you know, in terms of like that 12 to 18 month timeframe

will probably be about six months in. You know, this is the first restocking cycle where China hasn't been particularly active and the steel exports are affecting, for instance, Indian demand as well. And, you know, on the Europe side, you know, demand in Europe still really hasn't recovered. So that's, that's,

push the met prices down, down, down to the point where I think, you know, today we're basically at $180, give or take. So on the pricing side, that's where that is. From a cost perspective, we get into some interesting dynamics here. You know, the first thing is that I think what people will find is that contrary to the past, U.S. costs will be a little bit more flexible than they have been, if only because the railroads themselves found out sort of the hard way during COVID that you have to keep your people. You can't afford to let crews go. So they want to maintain volumes out to export. And in order to do that, they'll cut rates as prices come down. You're still going to make good money on those halls, even if they're only charging

$20 to $25 for the rail haul. You know, the port gets another five or so. So the U.S. can probably be competitive down to, you know, 175, 160 probably pushing it at the port. But it just reemphasizes the importance of getting strong domestic contracts, which kind of does into the U.S. Steel and the Pond deal as well. You know, that's a deal that could increase domestic steel production, increase domestic coat production out a few years, which would really be able to shore up U.S. producer balance sheets while the world sort of goes through this, you know, absorbing the blood of steel coming out of China. It's a really interesting, multifaceted sort of market here at the moment.

This episode is brought to you by Teegis, the future of investment research. Look, if you've been reading my newsletters, you know how often I rely on Teague's for my research. I probably read one or two expert calls a day, you know, probably average seven a week off of Teegis. They've got the largest transcript library in the world with over 75% of the private market. transcripts. Whether you're curious about AI, biotech, or any niche market, TIGAS has the insights you need. What sets TIGAS apart is its all in one pack platform. It's packed with expert call transcripts, management checks, panel calls, and in-depth financial data. No more jumping between different services or piecing together fragmented data. With TIGAS, everything is right at your

fingertips. The best part? The insights you get are from the very people shaping the industries you're interested in. You'll find perspective from insiders and executives that you can't get anywhere else. To see Teegas in action and understand why it's one of my go-to resources, visit tegis.com slash value. That's teg-us.com slash value. Trust me, once you try Tegas, you'll never look back. There's so much I want to hit on the specific pieces, but just last question you have to ask. It's September, mid-September in an election year. Election matter one way or the other for coal miners? I mean, traditionally you'd probably say, oh, Republicans win. Good for coal miners because they've got, but, you know, like a lot of the carbon capture stuff, like, it's not,

the coal stocks have certainly done well under this administration by and large. So just does it really matter at this point? Good question. I don't think so, really. There are going to be, they're going to be good things and bad things that happen, regardless of who winds up winning. I mean, I do think that, you know, in my opinion, it's probably less good energy policy that results in positive outcomes for commodity prices and for equity prices.

Yep. So that's the outcome that you're probably rooting for, you know, along with the other pecc delish, I want to root for the Democrats. But on the production side. I just want to, it's funny, when Trump gets up there and he's like, we're going to drill, baby, drill. Energy industry, vote for me. I'm like, energy industry, you need to vote for the Democrats. Like, you want nothing to do with drilling.

High prices, no drilling, no supply, let's go. And let's face it, Democrats have been permissive with regard to drill. Like, they haven't tried to do anything. Like, they've tried to outproduce everybody, as a matter of fact. So, like, while, and with Chevron deference gone, the ability of Democrats to legislate or to regulate from a, you know, from an executive branch perspective is pretty neutered. So those, those, you know, three-letter agencies can't necessarily create rules and enforce them in the way that they used to, you know, sort of arbitrate. fairly that has to go through other means now. And there are benefits and detriments to that, you know,

without getting into the, into the gory details of it. But, you know, I don't think that you're going to see the same sort of regulatory capture, regulatory push from the left that you've seen in the past just because they've kind of been, you know, they've kind of been kneecap with regard to that. So, you know, I think it would probably be, you know, more likely that Democrats would have positive outcome on energy prices and energy

stocks. I say positive, I mean they go up. That also means inflationary pressures. That piece other bad economic things. Probably means higher interest rates for a longer time. So it's a mixed bag, right? Whereas if the Republicans win, if Trump

wins, the one thing that's going to transfer through to the coal fields is morale. They know they're not going to get messed with from a regulatory perspective they'll be able to produce that being able to go to work makes people more confident in their jobs. And, you know, although the pricing

environment might suffer as a result of it. I also think the Republicans are probably better situated from a geopolitical perspective to wind down tension with China. I think Trump's more likely to make a deal with China than the Democrats. Just because the Democrats really aren't having much of dialogue

I don't think with anyone from a foreign policy perspective. I think that changes should I wait. So man, it's honestly it's all over the place. I think at the end of the day the next year or so it's probably not going to be so great for commodity stocks, but it might be six months. I mean, once we, once we start rolling back interest rates here, you know, if that unleashes the floodgate of

spending, and that, you know, we could be right back to square one with regard to inflationary pressures, you know, by this time next year. So it's, it's a complex ecosystem. Let's just say, I'm probably going to be more reactive to the short-term prices, you know, over this next year than I have been the last two, have been kind of agnostic to it to tell you the truth. But now we sort of wind up an environment where that might matter a little bit. But neither the Democrats nor the Republicans really do much to, you know, in terms of changing the long-term story. That's great. Let's go to the reason you and I started talking about having you on for a second pot.

Obviously, open invite that people love to hear Matt talk about Cole. But the reason we got excited is I started hearing people, and this really started humorously enough. there was a 13D filed on Peabody about two months ago, let's call it. And very briefly in it, it mentioned maximizing value for the PRB. And then people started kind of, and we can talk about the 13D, we can talk about people, but just here, all of a sudden I started hearing a lot of people talk about, hey, why isn't coal getting play for AI? And forget the demand pull through that we talked about.

They're talking about, hey, instead of shipping or paying the railroads to move the coal, shipping it across seas, all this sort of stuff. Why don't we build clean coal plants in Wyoming or wherever you want to choose? Co-locate the AI right next to it. You've got basically unlimited fuel source, a clean fuel source. If you can do the carbon capture and everything, AI is built domestically. There's tons of space. They'll have guarantee power.

Why doesn't coal all of a sudden morph into an AI play? So I kind of laid out like that would be your utopian vision of what could happen. But I'd love to hear from you, you know, how is, Is coal thinking about, are you hearing anything about coal, like kind of playing in that utopian actually demand from AI vision? Yeah, short answer is yes. And, you know, that sort of realization, I think, has really only happened in the last, call it six months, right? You know, I heard it first at that conference that we might see another coal plant built, you know, this summer. I think that was in July when I was down on Myrtle Beach.

and it's you know as analysts we've been talking about the possibility for years that you know you could see you know a natural gas plant paired with carbon capture or you know a coal plant paired with carbon capture so like the idea isn't foreign but the fact that it's starting to become a reality is is more the you know wow factor here so so there was there's one plant uh there's one project that this administration the Department of Energy Joe Biden's administration and Kamala Harris's administration gave $1.5 granted $1.5 billion to Wabash Valley resources.

And this was Monday, right? Like this is literally hot. Yeah, this is Monday. 1.5 billion to build a cold of ammonia plant with carbon capture in Indiana that's supplied by, I assume the Wabash mine there in Indiana.

But this is Democratic administration. is giving a billion dollars to coal and carbon capture in order to make ammonia in a, you know, I guess a more green, sustainable way or however you want to put it. But like, it's happened. I've done some work on ammonia. So let me just say that I know a lot of people who ammonia, you know, that is an input, if I remember correctly,

it's a fertilizer. And a lot of people think ammonia is a long-term solution for green marine fuel, right? Because I believe you can solar ammonia and burn it a lot cheaper than a high. hydrogen or something. So I guess you're saying, hey, this is a coal to ammonia. And I think reading the press release, you know, reading the Walsh Journal, I think they were more thinking of it, hey, fertilizer is in the national security. Ammonia's got a lot of like little call

options in terms of green. So I'm hearing you talking about it from a like coal perspective. And that is an interesting piece of it. But I wonder if that was almost just a byproduct and they were more looking at the pneumonia perspective. Am I thinking about that incorrectly? you are but they're pairing it with carbon capture and that's that also winds up being the get and you know i think it also sort of like opened the kimono with regard to well if you can actually sequester carbon there's money in that um you know it's not just uh whatever your downstream uh you know product is uh you know your value add product if you will but there's also you know value in the 45 qute section 45 q tax credits in the IRA which are uh and i got to read this off it's

$85 it's per ton of CO2 for sequestration, for pure sequestration, $60 a ton if you're going to take the CO2 and then use it for enhanced oil recovery. And of course, if you locate this in an energy community, you get a 10% bonus on both of those. So 9350 for sequester it versus 66 if you're using it for enhanced for EOR. so there's this is kind of what's starting to come together we've moved away from well let's pack the you know the let's pack the the interconnection to you with all these solar and wind projects they're never going to come on until 2035 you know and what can we actually do well we can we can try to do carbon catch I think that's we're at that part of the cycle where people have kind of realized that's possibility so it does not take a leap of intellectual you know fortitude to go from carbon capture with cold ammonia

and go to carbon capture with the power plant, which is really where I think all the kind of long-term ideas for all this stuff started. And here we are with Peabody with the largest mine in the Powder River basin

with very high quality coal. If you look at how they're making money now, they're selling the coal for $13 a tonne and then the rails charge $25 a time to take it down to Texas or wherever the plants are, right? And then the plants, you know, basically it costs them about $20 a ton to, you know, to burn it. And then you make probably the equivalent of another $20 a ton

when you pass it on to ratepayers. So ratepayers right now are paying like $80 a ton or $85 a ton for $13 a ton coal by the time it gets pulled all the way through to power demand. And that just seems crazy to me. So part of the value proposition I think that Thomas brought up in that 13 days is eliminating the middleman who are, you know, who have an interest in, you know, propagating those sorts of transactions. So, you know, if you just take out rail or, you know, rail gets less for a shorter move, that's a big chunk of that proposition. And then if power prices are $85 a ton, that turns into profit for whoever has the catchers mitt on downstream. Can I just push back on one point there? So I certainly hear all that. But

The rail, right, like if you're taking it from Wyoming to Texas, right? Like, they are actually incurring costs and moving that and like, yeah, it sucks. But I guess if I'm cutting that out, like, if I'm cutting that piece out, Texas has a lot more people than Wyoming, right? Like, so, hey, I'm kind of leaving Texas short change. Texas is going to have to do a lot of, like, I don't believe there's any coal mine in Texas. You can tell me if I'm wrong. There might be some up in like a small amount in Oklahoma if I remember, but there's no coal mine there.

So if I'm cutting it out, hey, Texas is going to have to read. jigger their whole their whole grid and be okay i'm keeping in my i mean if there's the a i play great i can sell it to them but you know then they're my only buyer i'm losing access to texas market so i guess just on like how realistic is actually saying we're going to cut that real player out because they are providing a service there i just mean for the for the downstream price right uh i mean the the plant i think that we'd be talking about here would be about a 300 megawap plant it's about a million tons of of coal consumption so it's not very much you know it's like million tons of coal consumption, call it 1.3 million tons, 1.5 million tons of CO2.

That's not really going to impact Texas. It's not really going to impact the rail at all. Okay, so what you're saying is this is just if they do this, and I'm going to ask you about the economics, if they do it, it's just incremental. And then maybe investors are under us and maybe how profitable it would be because, you know, as you said, the coal costs 20 bucks to mine and then 20 bucks to ship. Well, when you negotiate with the AI company, you kind of say, hey, why don't we split that? You keep $10 of the shipping.

We keep $10 of the shipping. This is our most profitable thing. That's kind of how you're thinking about it. Yeah, exactly. I mean, you know, it gets ridiculous by the time, you know, the power gets passed on to rate payers. And so the idea here would be for, you know, for the AI data centers,

the closer you can locate to, you know, an existing, you know, fuel source and, you know, local power grid, then the cheaper that you can get, you know, a long-term contract power delivered to. And that's what I think their get is going to be over a longer period of time. And that lowers the ultimate price that both ratepayers will pay for the excess power and also for whatever services that AI provides, you know, lowers their cost over.

So it's more an optimization than it is anything else, right? What with the timing? Because, again, I, you're deeper in the industry than me. You started hearing it six months ago. I started hearing it six weeks ago. But obviously, this is new. But one thing is, it is an AI arms race. And I've seen some of these, like, the Bitcoin miners selling their assets to hypers.

And when I've talked to them, what they've said, or the Amazon's Halland deal we mentioned, what they've said is this is a race. And we understand that we are paying kind of top dollar to get these assets. But these assets are ready to power right now. And, you know, let's say we pay a billion dollars for a Bitcoin miner, or, you know, an asset that's in the ground. If it's ready today, we're going to put $5 billion of GPUs, and we're going to be sending, you know, data sciences and computer engineers

who we pay $500,000 a year. So even if we're paying a premium for the data center with access to power immediately, actually when you NPV it, it's better than, sure, maybe we could go build that data center, but it would take three years and we've got to get internet connecting, we've got to find power. So because it's so expensive on the GPU side, we need it now, I guess my question to you is, you heard about the six months ago, I heard about it six weeks ago, what would the timeline be? Because if the timeline's too long, you know, the AI companies, they can't lose this. It has to be quick. So what would kind of the timeline be if somebody actually wanted to pull off this AI coal power play? Well, I mean, if you're going to build a new facility, period, stop. Like you're talking about a two to three year build, right? You know, for a 300 megawatt plant, it's going to take, you know, something like that. So let's move back from there. So two to three years. build you probably this never done carbon capture at scale before so you're probably going to need

you know i think this uh this this this feed study that uh the bt u may participate in uh with pacific corp uh will take about a year to do uh and then after that you'll have call it two maybe three years of uh or call two years of permitting and observation right so a year of the experiment of the pre-feed two years permitting an observation and in a two or three your build time so it's like 2030 you know when you're when you're actually going to see something right let me which is not tomorrow let's be clear but it's not tomorrow but you know you would have line of sight and it be differentiated and i can see a lot of ways work let me ask you different we i've just this taking it on face value carbon capture with coal is good and i you can correct me from

wrong, but I believe the science, if I remember, most of what they're talking about was for Nat gas, and they haven't really applied it to coal yet. Now, there's no reason a Nat gas coal capture shouldn't work for coal. Nat gas carbon capture shouldn't work for coal. But correct me if I'm wrong, I don't believe it's been applied a lot of this big carbon capture with coal. So what is the state of that technology, like how easy it would be deployed to every coal plant in America or any new coal plant? Like kind of how should people be thinking about that? It's hard to say. Well, first of all, you have to have the infrastructure. structure to store it or you have to be able to process the CO2 and do something with it,

you know, whether that's salt and oil company for EOR, whether that's, uh, put it underground, put it underground, whether it's, NRP, say, hey, you guys have all that acreage, put it underground. Yeah, or, you know, reprocess it and turn into food grade CO2. Like, I don't, you know, that's, uh, that's not necessarily my bailiwick, but why it's, why it's failed before is like, well, first of all, we haven't had the credits that were there like they are now under the IR. Yep. So that's thing one.

You know, number two would be logistics. Like, we don't have the logistics necessary, you know, to, you know, in the past to handle anything like that. And then, you know, the third thing would be the corporate development that would need to go along with it because it's not just a utility that would want to do it and do it at scale. Like, you need a fuel source. You need either the rails to buy in or you need sort of alternative transportation to keep that. you know, cost down to a minimum. It's just, it winds up being a lot of cats to her. And they've never had all been incentivized all at once to look at the same, you know, dangly thing, right? And that's that's where I think we might be here at the moment, but it's, you know, it's not, it's not a quick

solution. It's not going to be a panacea for, for power demand. We're still going to have to build a lot of other plants as well. But what it can be is a model for how to do it without contributing to, you know, without contributing to the carbon problem, any worse than it already is. And if that's going to be a value that Western governments continue to have, like, there need to be scalable solutions available to them that they can point to and see, look what we did over here in Wyoming or in Indiana or somewhere else. You need a model by which for other people, other non-expert governments, to base it on, right? I think I'm going to let you have the last dollar in the AI and then I want to move to

But I think what's just so interesting to me is when I talked to you six months ago or a however long ago, if we talked to coal people five years ago, people have always said coal is a dying industry. And, you know, for 20 years, American energy demand was basically flat. And then as you and I are talking today, it's growing really quickly. You know, everybody's seen the charts. Google, Wall Street Journal, PJAM demand or something. It's growing.

People have no clue to keep up. And it's all from this AI stuff. And maybe AI is a bubble. maybe it stops. It doesn't seem like it. It seems like demand is going straight up. And all of a sudden, coal is still, coal plants, everything, it's still priced at like a dying industry. And all of a sudden, you could see that death is a lot longer and maybe it's a growth industry. So anything else on AI, and then I want to hit a few other interesting things that have happened. I mean, you know, once again, I think from our sovereign perspective, it would be

hub us not to win the race. And in order to do that, we're going to have to grease a lot of skids in order to, you know, make sure there's enough infrastructure availability for these companies to succeed. Because it's going to be the private sector that does it, not the government themselves. It just government's got to clear the path and get out of the way and, you know, help where necessary, mostly in the form of either funding or credits or incentivization or those types of things to keep the project, which is run by the private sector, on track, you know, and on budget. That's really the role there. but, you know, I think it's become clear that we got to do it.

And I think it's become clear that we can't achieve that goal and approach the power industry the exact same way that we've been doing it, you know, on my side of the aisle for better or for worse for the last like 20 years. I mean, I've been, you know, waving my hands at, you know, at every meeting I can in D.C. to try to get people sort of aware of that. And of course, you know, and we talked last time when I go to nuclear events, they all know. They all know the NIMBYism that comes with that and how it's difficult to be a base load generator. The natural gas guys all know.

So there's kind of like this, you know, there's a neat little consortium of experts who, you know, I think are having some influence on the fact that this is going to have to be in all the above solution going forward. and that you know I think it's becoming clear to everybody that this is a race that we ought to win just in general so it's so the race is it but it is sad with energy policy for so many years people pointed out like hey this energy policy is silly and politicians didn't didn't take it seriously and I think you and I come from the exact same place with it but it's so sad that they don't take it seriously until all the sudden starts hitting people's either pocketbooks with energy or pocketbooks with gas prices or energy prices and then all the politicians get voted out and they realize, oh, my God, if we don't address this, it's a disaster. But, you know, with just a little bit of foresight, a lot of this could have been avoided. You know, like, we're not going to be the first where people say nuclear industry over the past 30 years has been a disaster. It's just been sad that we didn't invest in.

But let's go to some other stuff. First of we talked. We mentioned coal. We mentioned the coal for AI, which I think is super interesting. There's been two other big things, in my opinion, in the coal space that have happened. Number one, we've mentioned, but we haven't really started talking about it. the Peabody 13D and number two

Console and Arch announced the merger just a couple weeks ago. I'd love to discuss both of them because both of them are so interesting and have impacts on the space overall. Do you have a preference where we start? Well, let's start with BTU because that dovetails into the previous conversation we were having about colon AI and it allows us to kind of get in, maybe get into a couple

of the weeds there. Perfect. So BTU, great. Beginning of August, 13D filed. Activists has bought 10% of the company, very, very simple 13D that says, hey, I want to talk to you about maximizing the value of the PRB assets. I'd love to talk to you about that. And the other interesting thing, there were a few other things. The other interesting thing in it, he says, P-Body has, let's round it up, 1.5 billion of cash on their balance sheet. P-Body, when they talk,

they kind of say we have 600 million because the difference is they've got about 900 million reserve for surety, ARO, all that type of stuff. And I thought that difference was very interesting. I think you know where I'm going with both of those. I'm very much leading the witness, but I'd love to get your overall thoughts on the Peabody activist filing. And as you tell, I've been taking here, as I said, I've got a small position. I'll get real granular to you, but I love to get your thoughts and you can probably tell where I'm going. Well, I mean, so, you know, there were basically three tears to it. You know, the first one, I think, that we've already seen an improvement in is I thought their earnings call was great. This last one. I thought they did a really great

job of communicating, you know, what the issues were in the market and how to, how to tee up the next, you know, the next few quarters. You know, they were positive on the call, kind of transparent and account, like, you know, just basic blocking and tackling. Like the, the communication, you know, post-13D filing relative to the communications in, you know, past conference calls, I already thought there was a pretty market improvement. So, like, for me, that's sort of step one. I think, you know, now most coal companies kind of come around to the fact that their audience and their, you know, their, their shareholder base is a lot more diverse than it used to be. You know, it's not just institutions. It's not just people who

understand the industry, you know, it's not just the iBankers. You know, now we have this like mix of retail and small family offices and generalist funds, you know, people who don't have, you know, who didn't have ESG requirements and stuff like that. And communicating to that broadest set of investors are very challenging. So you have to do it pretty simply and you can't really get too far into your own. You can't talk a lot of shop. You have to kind of keep it at the top line. And they did a really nice job and planted down the middle on the last call. So that's step one.

Number two would be the selldown of Centurion to some degree, right? So they have, you know, Peabody took a stance and said, well, we think we think Centurion's NPV is about $1.6 billion. You know, that's at like a $210 coal price or something. So it's pretty conservative. When I run it, you know, at 215, $1.20, I get about $1.6 billion, too. So I'm right in the same ballpark when I take my assumptions and plug it in there, I think that's a pretty fair estimate.

You know, what we saw with, you know, with Whitehaven was that when you get a valuation that is reflective of, you know, what we think, you know, medical prices are going to average over a longer period of time, you know, not just here over the next year or two where, you know, maybe over the next few months we struggle to average 200, you know, but, you know, in two years, we're back to, you know, averaging 250 years. if you value this at 250 and you get you get a partner that comes in that says okay well I want to be sure that I have the supply and I'm willing to you know to buy in at a 20% premium you know I think that's a deal that you take right that's that's what motivated the closure

of you know of a Whitehaven deal with Japan and I think if you know somebody came into you know to offer that kind of you know that kind of outcome here they'd have to really consider it and you know that adds cash in the balance sheet that they can buy back shares with or you know hold in reserves to ensure that insuring gets repleted and there's all kinds of stuff that you could do so so I think that's the number that's the that was the other big get I think that you know was there third one in or should I lob some questions at you you can't I mean the third one was you know maximizing the value of PRB asset

be that through you know an AI data center for instance you know partnering with, you know, probably it's going to be, you know, Meta, Microsoft, or Amazon. I mean, meta's already in Wyoming doing work there. I think that's, is that Black Hills, I think that they're working with there? I can't remember. But so with one of those companies to bring it into some sort of locale, Wyoming's all for it. Everybody in Wyoming wants that to happen. I mean, really the only issue right now is, you know, I do think that the top-level companies

are looking a little bit more at population centers and latency rather than trying to minimize power costs. But, you know, that would be, you know, let's call it to, I think power prices call it high 40s for megawatt hour. And for on peak and high 30s probably for off peak, the cost of that business per megawatt hour is probably about 25. Lux. So, you know, you're producing, let's say, about 1.6 million tons of CO2 at 9350.

You wind up with the, you know, about if there's no credits available, it's probably like a 70 million per year EBITDAB business, 7580, somewhere like that. And then if there are credits available and you maximize the value. of them. You're talking about like a 200 million EB-Dah business with the credit. So like if you go down that road, that's every year. That's annual. And this is a

3 billion market cap company. So let me jump in there with a few different questions. We can go over it. Let's go in reverse to everything you just, let's go in chronological order to everything you just talked about. Let's talk about the way they communicated on the earnings call first. And there was

something interesting they did. And And I'll mention this with the C.I.X. Arch merger as well. CX. Arch merger. They came out and announced their merger. And on the merger call, more than half the questions and more than half of it was devoted to CIX and Arch talking about an analyst asking, how are you going to return capital? And they're basically just saying, we're going to buy back shares. And the Peabody Q2 call, they talk about, hey, we increased our share buyback by about $100 million. We're going to return capital. And they also came out and had this really weird thing I thought where they said, let me make sure I've got it. They said, our stock recently crossed

the 50-day moving average and the 100-day moving average as coal equities have traded off with coal prices. So we see this as a really attractive point in time. And I listen to hundreds of earnings calls a year. I don't think I've ever heard a management team on a call talk about 50-day and 100-day moving averages on their stock. And I don't want to get too belabored on that point. But what I'm asking is, I'm just interested that you've got CIXR's merger, biggest merger in coal in years, you've got Peabody and their news call. They're almost talking like bad pod shop analysts versus coal management teams. So I just wanted to get your thoughts on that overall frame point as how they're communicating

while you think they're doing that, how you look at that. I mean, I think that was an effort to, you know, sort of appeal to the Magic Lions crowd. It's an acknowledgement that they have folks who are looking at those sorts of things and sort of a signal that they're aware of it, I think more so than anything else. You know, I certainly would never, you know, apply a value to a company based on 50-day moving average or whatever. You know, I think Peabody is undervalued because I don't think, you know, I don't think the market's giving credit for higher met coal prices in the future at the moment. I don't think the market's giving credit for, you know, Centurions, free cash flow generation at those higher prices, certainly.

And I don't think the market's really given credit for, you know, the possibility that they might be able to sell down a little bit of the operation at a premium, which would be, that would be a good outcome. I mean, I think that's the only deal that you accept, right? And I don't think the market's given them credit for the fact that, you know, a plant in the PRB is not just a distinct possibility, but I think, it's better than a coin flip to be reality by the end of the decade. So, you know, if I were talking, that's probably what I would allude to, you know,

less so than the 50-day movie. Look, it just, it jumped. I read the CIS code first, and I was like, oh, this is really interesting. People don't really care about the merger. They care about the capital return. And then I read the Peabody thing. I was like, oh, my God, I've never, so it was a good question, and it's a fun way to frame it.

But I completely hear you. It's just to remember. Let's go ahead. I mean, the next. Well, I mean, they did say, like, look, we got $100 million for buybacks, and by the way, we're below the 50 and 100-day moving average, which, you know, to be fair, usually when that happens, it's not such a great sign when it moves below those averages. But, you know, again, I think, what are we valued at? Like $2 billion here at this point of time, 2.2 or something? I've got it with the converts. I've got it at 3.2 at P.B.O. but, yeah.

Yeah, so, you know, it's still too cheap relative to its peers, let's just say. And that in and of itself, I think, will be, it'll be easier resolve on the upside. And, of course, they have a buyback, which I think will put a bit under the stock as time keeps going on. But, you know, all of us still need coal prices to go up for, you know, to really make a mint, too. So let me turn to a classic yet another value podcast question. just sticking with capital allocation, right? All of these whole companies have gotten the memo. You are capital return stories, at least in my opinion, they've gotten them.

You know, some people debate, you know, Peabody, they've got the centurion investment, Warrior, they're still finish up a blue creek or blue coal, I can't remember. But they all know the end game is you just return the capital of the shareholders. Maybe you do the console arch merger, get some synergies along the way, but you do the capital returns. I think they, you know, they hear from us. They say you're underpriced. They say, we agree. We're buying back shares.

right into below the 50-day moving average. I guess my question is, why is there no insider ownership? You know, insider ownership sucks across the board at all of these coal companies, except for maybe AMR. Why aren't we seeing insiders step up and say, hey, Peabody, our stock is cheap. Let's buy some. We believe, I want to turn to Centurion in a second, but if you believe Centurion is $1.5 billion in NPV and our market cap is $3 billion, well, gosh darn it, we're really effing undervalue. Let's buy some shares. Let's get some exposure to the stock. Well, I mean, you know, first of all, most of these companies are mature. I mean, you know, Consul's been around since the 1800s.

Peabody's been around since the 1800s. Arch was formed, you know, in the, you know, mid-1900s, you know, actually Randy Atkins, who's CEO of Ramico, his dad was one of the people who founded Arch. Like, you know, at this point in time, you know, Alpha has been around for 25 years in some form. And, you know, it merged with Massey 10 years ago. has he been around since, you know, 18. So these are very old, very mature companies. And, you know, the founders are long dead.

I hear you, but I just, you know, they all trade really cheaply. They buyback chairs. If you're in management team and you believe it, or you're peabody and you say, oh, we'll talk PRB in a second. You believe it's insuring. You believe that you might get a dated. I'd love to see them just write a $50,000 check and buy stock on the open market, you know. And that's what I think you're going to see here at some point in time. And when you start it, in an industry that is primarily run by managers rather than found, right?

You know, the shares are part of their compensation structure. So insider sales aren't really that telling. That's part of how people get paid. Insider purchases, on the other hand, tell a very different story. And, you know, we certainly, you know, we're going to see that when, you know, coal prices are going to the moon. and so we're stock prices, right? But now we're on the other side of that cycle. And some of these people have done really well over the past two or three years.

And I would go ahead and go out on a limb and say that when things you think are starting to get maybe pretty bad or maybe the outlook doesn't look so great, but you start to see insiders buying, I think that'll be a bigger vote of confidence this time around especially than it meant last time. nobody had paid any attention last time when, you know, when you saw Mike Gorsensky, you know, come into the market and buy, you know, umpteen, Jillian alpha shares at, you know, at $200, you know, so, you know, but now, you know, if you see, you know, Andy S or you see Jim Gretch or Mark Spurbeck or somebody come into the market, you know, and buy shares this time around, that means more, it means more than it did in the previous cycle.

So, you know, with regard to that, I'm not so concerned about the overall potential. But I do think that when you see that participation inflect beyond compensation, that's something to pay attention to. I'm ready for it. I'm here. I'm ready to strap onto the rocket and ride it to the moon. Let me ask one more question that I think I'm a journalist. Any journalist who looks at the space is going to be one of the first questions they have. Elliott, BTU was a big overhang for several years and they basically blew out of their state last year. And we're not speaking to Elliott specifically, but, you know, I think people look at this and say a very sharp hedge fund with that, that wrote it basically, if I remember correctly, Elliott made the investment in like the late 2017s in the mid-20s.

They ride it all the way down through COVID. Everything's dying to, you know, they buy in the mid-20s and they see it hit maybe the mid-20s per share. And then they write it back up to the mid-20s and they sell in 20s. And I think people might say that was before the AI boom happened. everything, but say, hey, you've got this really sharp company that owned a lot, and they basically blew out of the stock pretty aggressively. Like, why wouldn't they have stuck around for another two years when the valuations were cheap, the cash flow was starting? You know,

and we don't have to speak to their thing specifically, but I think people look across the sector and kind of look at that. Well, I mean, duration was part of that, right? You know, they invested in 2017, it's 2024, and they were done with it. You know, they'd been through that cycle, and that was as good as they were going to do and I suspect they didn't want to go through another site whereas, you know, Thomas this time around obviously the story is a lot different and they have a very different understanding

fundamentally of you know of metan thermal coal markets so I think the personnel is different and it makes kind of a difference you know, different people are differently sharp I'll just say that. I think ask an answer and I think that's a great answer. This episode has brought

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Two juiciest questions I have for today. Let's start with, I want to go to the PRB, right? We've mentioned how the PRB could be a real asset if they, you know, build an AI data center and start funding the billings. But I think there are other levers they could pull. And I kind of started hinting at it when I said, hey, Peabody says they've got 500 million of cash on the balance sheet. The 13D says they've got $1.5 billion.

There's a big difference in its charities. I'd love to talk about the other levers that could be pulled to unlock value in PRB. Yeah, it's hard to say the shorties are an issue, and you would think they could be renegotiated, but from what I understand from talking to, and other people, it's really hard to negotiate those down. You know, the best thing that you can do is mine out what you're supposed to mine out, because you reclaim as you go. You can't reclaim all at once. If they stop mining, you know, they'd be losing money for a few years while they, you know, while they filled in what they had. So, like, they wouldn't, you know, money wouldn't come back, you know. You're closer to the space than I am.

But if I remember correctly, Arch or Alpha kind of shut down a project because the surety and everything was getting to overlap. What about regulators grinning surety, ARO, whatever, relief to kind of support the industry, keep these jobs going, maybe encourage. Is there anything along there? Am I just kind of seeing magic mushrooms? I can't see the government. uh you know pulling back the requirement to you know to backfill you know to reclaim land back

to approximate original contour okay that doesn't that doesn't seem like something that's that's in the cards um you know honestly the i really think the easiest way for them to get that money back onto the on to the right side of their of their of their cash balance is to just mine it out is to keep going and one of the ways that they can keep going is to find these downstream projects and even kind of create them. That'll create 20 years, 30 years of demand. So that you, over time, you monetize all that short-tee money right back on to your cash balance.

So I might have been just making, I might have been a little too aggressive. Again, it's a very short 13D that says maximize PRB value. I might have been a little too aggressive thinking about the cash differences and maybe realizing value there. I mean, it's one of those things where you have to have them or you can't operate. And if you were to, you know, just say, okay, well, we're done, shut it down, let's reclaim what we have and take the rest back or whatever.

Well, I mean, you're still going to lose money while you reclaim and you're not producing over those few years. And so there's an optimization that you have to do. Well, how much money are we going to lose while we, you know, fill in this giant pit, you know, with 40 foot scenes, mind you. It's not a small. You know, how much is that going to cost us to, you know, to get. it back to here. And, you know, what does that do to our cash balance in the, in the process?

And I think, you know, the broad conclusion, and I haven't gone down into the shorty weeds by any stretch of the imagination. I've had, you know, slightly below surface conversations with some people who know. And pretty much the universal answer has thus far, at least, you know, spoken to me has been just mine, Nicole. Okay. I find Nicole, get it done. And then come out and come out the other. side of it. That's the best outcome. And

with, you know, now that we're not retiring coal plants quite as aggressively, specifically in the PRB, if they're going to get a new lease on life, I'm not sure that's necessarily as big of an issue over the longer term. They haven't fully funded, which is great. They don't have to put any more dollars toward it. In fact, we're going to get some back

gradually as they go. You know, I'd love to see more come out of that that they could buy back shares with. And if there's a process whereby that could happen, I would 100% support it. I don't know what that process is. Let's quickly at Centuring and then we're running long, we can wrap up, or we can rip on coal forever if you want. Just insuring, I want to ask you two questions. One friend framed it to me

like this and I really like the framing. Hey, 18 months ago, if you were looking at HCC, met, where it met, this Blue Creek project, it was clear there was value, but because it's a coal company, no one was looking at it, nobody gave value. And then as it got closer and closer to start up, people started to give it value. And that's basically been the best performance. met stock over the past 18 months because, you know, it's gone from basically 25 to 50 and as prices have come down, everything else is kind of flat. And that's because people gave that value. And the way the friend frames me was, hey, with Centurion, that's where you are with BTU right now. You know, they just in June, I believe, they had first poll come. They're really going to start

ramping over the next two years. I think 2026 when it's fully online, it was basically like, look, when you roll the calendar to 25, it's going to be beating people over the face, how much cash flow this things about should throw off. And whether they sell a stake or not, that's where you are. How do you feel about that framing? Do you like kind of like that story? Would you push back anywhere? Yeah, that's pretty good. I mean, you know, 250 bucks, they're going to make about $300 million in free cash flow, like not, you know, EBITDA, not anything, like free cash flow at those elevated Metcold price level. So, so yeah, I think that's right. You know, will 25 be incredibly successful, you know, from a medical price perspective? It's looking like probably

not, you know, with China where it's at. Never say never. I mean, we're headed into winter on Enia's down in Australia. We have one singular weather event that takes out supply. Or we have some kind of an outage at a mine down there. Like there's no upside surprise. It's basically on the supply side. So, you know, any supply that comes out can see prices go right back, you know, basically to where they were. But absent any of that happening right now, you know, I think it's going to be about six to 12 months before we see pretty material improvement, you know, from the China steel debacle. And that has to get resolved before met can start sailing again. Now, there's also, I should point out, iron ore. Iron ore's been declining as well, as stockpiles,

you know, kind of build up on the Chinese coast for that commodity as well. The more that iron or comes down, the more space that carves out for cooking coal in the total cost build up of a steel plant. So I think there, you know, that these prices here around 180 are pretty supportive. Like 180

down to like one, you start getting down into like 175, 175, 170, 160. You're going to start to see closures. Yeah. But but here at like 180, you know, everybody can make a little bit of money. And then I started to mention earlier, trade flow is also a

just, right? So if you're the U.S. right now, the arbitrage window into Asia is closed. It's done. You can't match a PLV plus shipping into India right now to save your life. But also, the Australia is shut out of Europe. They're shut out of Brazil. So they're, you know, they're still going to deliver contracts, but they're not going to make that much, you know, that much money off of them. And when the price gets this low, the other thing that happens on the Mets side is trade goes back to their natural places. The U.S. supplies Europe and Brazil. and that's it. You know, Australia supplies Asia, and that's it. And then the two basins don't really mix around too much. So we haven't, we haven't seen that adjust yet because we're still in the

middle of a year. People still have committed tons that they have to deliver. That's got to work itself out before, you know, China works itself out before we start to see some relatively more predictable outcomes in the metcold market. I hope that makes sense. No, makes so sense. Last question on Centurion, and then I'll let you wrap it up and we'll go. You know, there's two things that could happen here. They could develop this. I mean, look, the big risk is always meteor strikes, whatever, but they could develop it. And in about 18 months, they've got one of the lowest cost met coal producers in the world. And it's just our discussion cash. And we love that. The other route that you go is, as you mentioned earlier, they could sell a stake in it.

It could become a jv. They could sell 25% of a strategic partner, whatever. They could take that cash in and then hopefully buy back shares, do some capital allocation, right? And I'm of two minds, right? Of one mind, everything's opportunity costs. Selling a crown jewel for a big multiple and buying back your stock at three times EBITA sounds really nice. On the other hand, historically, when you have a crown jewel and you start selling pieces of it, you know, generally when you're kind of selling the crown jewels to support everything else, it's not great. So I could be of two minds of it. I'd love to just ask if I gave you right now the world as we know it, what do you think would make the most sense? What would make you the happiest as somebody

who follows me to you. I mean, if it's me, I mean, I'd rather just keep the mind and, you know, cash flow the operation and buyback shares that way because I don't think they necessarily need a partner to make full value. But, you know, again, somebody comes in and pays you, you know, a 250 average for 25% of the operation. All you're doing is pulling forward that cash flow to right now. So it's kind of six and a half dozen on the other.

And then if one of those, you know, the person who's buying it happens to be a big steel producer or somebody who has a vested interest in the off take, like it's a good business relationship to have too that can increase over time. So it's, it all depends on the circumstances, but just if you in a vacuum, I'd rather just keep it behind the coin. I'm with you. I just keep thinking like you sell it for 25, sell a 25% state. You get hundreds of millions of dollars in and then you buy your shares back now. like I used the Warrior Creek, the Warrior Met comparison earlier. You know, if they had bought back 20% of their stock at 25 before it went on that run, like the run would have been even more epic, right?

And maybe BTU has that chance, but you know, they announced they sell a 25% stake and the stock would probably be up. So I was just kind of doing all that math. And with an activist that is something that is math, the company needs to be doing. So it's something we could look at. Matt, this has been awesome. We've gone way over an hour. We've hit on so much.

I didn't get a ton from C-I-X, Arch. Maybe we'll save that for another day, but just want to wrap it up. Anything in the coal markets you think we should have hit harder that we kind of miss or anything, or can we wrap it up here? I mean, I can make a quick comment on C-I-X and Arch. I mean, really to get there is you consolidate all the big long-wall production

in West Virginia under Consol's expertise in operating culture. Like, they're the best long-wall operators in the business. Jimmy Brock was one of the greatest long-wall operators ever. He knows how those assets should be run. That's a win there. They also get some synergies from owning the port in Baltimore. So Lear and Lear South, you know, I think we'll probably have some flexibility with the rails as well that the Consul enjoys. And then also the Arch Beckley mine down south in central Appalachia is not terribly far from Consul's Ithman mine as well.

And Beckley has access to CSX, which has access to Archesport, you know, in Newport News. Now we can take Hittman Cole, you know, truck it up to CSXV1 and go out through captive, you know, a captive port in, you know, that archedown. So like those are the synergies that I sort of understand and get really well. I think we're going to make a world of difference for both companies. I'm still, you know, Western assets are a bit of a question mark for me. But, you know, West Elk can make some money. And, you know, we talked about the prospect of, you know, the PRB is a call option on AI data center available. ability. So who knows? But, you know, that's been the other big thing that went down. I think

probably worth taking a couple of minutes to chat about. But, you know, really other than that, I think we're at the point of the time of the cycle. We're just, you know, take a deep breath, hunker down. You know, it's going to be a long few months from that. We're heading into thermal coal shoulder season. But now's the time when you start making a list and going, you know, which companies who I think, you know, are the best targets. And when prices start moving the right direction, when you connect. Matt, I should have mentioned that to start. Since our last podcast, you know, our last podcast you came on and you're like, hey, I'm glad we're doing it now. I might be, you know, getting locked up. So I won't be, not lots of for jail,

locked up in terms of I won't be able to be as public. So, you know, I'm glad we're doing it now. And since then, actually, happy, you took over the coal trader, which I'm a subscriber to, a happy subscriber to, so you can continue to be public. And, you know, I love following it. I read just about everything put it. And sometimes you say stuff where you're like, you know, the coal is going down this route and should be going down this route. And I have to not on my head. like, yeah, okay, that makes sense. I'm not really sure what's going on, but it's great to follow as a generalist because I get really deep insight. So I'll include a link in the show notes, happy sub if anybody wants to check it out. But Matt, this has been an awesome run

through. We'll have to do a follow-up maybe as the year turns or something. Just see how everything's going on because lots going on in the coal space. We'll have the election. Fortunately, we'll be behind us one way or the other. We might get some more movement on Peabody. Well, it's just a really fascinating time. But Matt, really appreciate you coming on. link to the cold trader in the show notes and looking forward to the third time. Sounds great, Andrew. Thanks a lot. A quick disclaimer. Nothing on this podcast should be considered an investment advice. Guests or the hosts may have positions in any of the stocks mentioned during this podcast.

Please do your own work and consult a financial advisor. Thanks.