Peabody Energy Corporation (BTU) Q1 2026 Earnings Report, Transcript and Summary

Good day, and welcome to the Peabody Energy Corporation Q1 2026 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I'd now like to turn the conference over to Kala Finklang. Please go ahead.

Thanks, operator, and good morning, everyone. We appreciate you joining us for Peabody's First Quarter 2026 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, Kala, and good morning, everyone. Peabody's first quarter was marked by a number of accomplishments amid a positive time for both thermal and metallurgical coal markets. We delivered better-than-expected volumes, pricing and costs in our Seaborne Thermal segment, supported by sharply higher global LNG prices in March. Our U.S. thermal coal volumes continued at a strong pace, driven by continued strong electricity demand. And across our seaborne met portfolio, operations performed in line with expectations, with the notable exception of Centurion. Focusing on our top priority, Centurion, I'll provide a thorough update of where we are today. As you know, as part of our commissioning of equipment in February, we encountered temporary mechanical and electrical issues. While those challenges were resolved, the disruptions led to a slower cutting speed, which in turn contributed to roof control conditions. Maintaining roof integrity is critical to sustaining optimal cutting speeds. As a result, early in the ramp-up, progress was slower than we were anticipating even after resolution of the mechanical and electrical issues. Importantly, once the mechanical and electrical issues were resolved, the team implemented a comprehensive response plan centered on proactive strata management and disciplined execution with safety as a top priority. We have brought together a highly experienced group of engineering and operational personnel from across the platform to address these challenges. Since that time, we have been systematically working through what was at its core an iterative cycle of slower equipment performance affecting roof conditions. Over the past several weeks, we have taken deliberate steps to stabilize the operation by reinforcing the roof and face, realigning shields and improving overall cutting conditions. Naturally, every mine is unique with different geology, equipment and operating conditions, and it has taken some time to apply the right solutions at Centurion. While this has required a longer-than-anticipated commissioning period, it ensures that safety remains paramount as we work toward durable solutions. Our safety performance has remained strong, and I want to be clear that we have had no carbon monoxide events, no methane issues, no ignition events and no regulatory challenges. While we are not yet at full cutting speed, the key remediation steps are largely in place, and we are encouraged by what we're seeing. We believe the remaining temporary headwinds are largely confined to the second quarter, with performance in the back half of 2026 expected to reflect a return to full longwall production rates. We expect to sell roughly 300,000 tons in the second quarter, reflecting strong June production, but a traditional lag in converting production at the mine into sales at the port. Additionally, the 7-week longwall move that had been planned for the fourth quarter is now expected to shift into early 2027, which will support stronger production in the second half of this year. As a result, our full year sales outlook for Centurion is now 2.5 million tons compared to our original expectation of 3.5 million tons. With that said, we've updated full year met segment volumes to reflect the 1 million ton decrease and increased cost to a range of $123 to $133 per ton. Stepping back, Centurion remains one of the most attractive assets in our portfolio with a strong position on realized pricing, cost, structure and mine life. In addition to our coal mining and marketing business, we continue to make progress in our Peabody development initiatives in recent months, focused on unlocking additional value from our vast array of land, reserves, operations and commercial relationships. When we spoke last quarter, we had been recommended for a $6.25 million grant from the Wyoming Energy Authority, and that grant was awarded later in the first quarter. Peabody is now advancing initial plans for the pilot plant to process rare earth elements using PRB coal as feedstock. We also continue to advance additional opportunities related to rare earths and critical minerals. We have a particular focus on germanium, where we see good concentrations, strong end market engagement and favorable supply-demand dynamics. For proprietary reasons, we'll need to keep details at this level for now. I'm also pleased to note that initial test shipment is occurring this quarter for West Coast thermal coal exports. We have sent PRB coal from our North Antelope Rochelle Mine, transported by Union Pacific Rail to Mexico's Port of Guaymas, which is being loaded for export to an Asian customer. This test run reflects close coordination with U.S. and Mexican governments, port authorities and logistics partners. It demonstrates the potential of a West Coast export route for PRB coal. While this is a proof-of-concept shipment, Guaymas has infrastructure that could support additional volumes over time. More broadly, this effort underscores Peabody's ability to connect the largest coal basin in the Western Hemisphere with the largest global demand center for thermal coal imports. We would also note that recent U.S. policy actions continue to affirm the value of reliable coal supply chains and baseload generation capacity to national security and grid resilience priorities. That follows an executive order during the quarter that directed U.S. defense facilities to purchase power from coal fuel generation. We view these moves as highly constructive, both symbolically and practically for longer term coal use in the U.S. For more on the U.S. and global supply-demand fundamentals, I'll turn things over to our Chief Commercial Officer, Malcolm Roberts.

Thanks, Jim, and good morning, all. Last quarter, I noted that we had seen strong upward moves in the past year, first in U.S. coal demand and later in the year in met coal pricing, but that seaborne thermal coal had been stuck in a middling trading range. Recent events in the Middle East, though, have changed the seaborne thermal coal fundamentals. Leading into Q1, seaborne thermal coal had been somewhat range bound with a mild winter in much of Asia suppressing burn and strong domestic production running in China and India had kept seaborne demand modest. However, 2 major forces emerged that both increased demand and constrained supply. First, the Iran conflict in late February caused a sharp re-rating of thermal coal demand and prices moved upward with March Newcastle averaging more than $20 a ton higher than pricing pre-conflict levels. At the same time, high LNG prices and limited availability pushed multiple countries to rely more heavily on coal fuel generation. We've seen both policy support and practical actions for seaborne thermal coal across Japan, Korea, Taiwan, Vietnam, Thailand and the Philippines, among others. As history has reminded us, whether it be Fukushima, Ukraine or the Middle East, coal remains by far the largest source of electricity in the world and continues to play a critical role in global energy security. Coal is abundant, transportable, storable and reliable and today still fuels more than one out of every 3 electrons worldwide, far more than any other form of generation. The second major factor impacting thermal coal fundamentals was Indonesia's directive to keep more coal domestically, which has begun to take a real bite out of supply. Indonesia exports over half of the world's seaborne thermal coal and its government has announced cuts in production that would represent about 1/4 of its exports if fully implemented. We've grown accustomed to such acclamations coming in short of original estimates over the years, but even a portion of that dramatic cut would mean a tightening of thermal coal fundamentals. I will note that not all developments in the seaborne coal markets are favorable. Freight rates have roughly increased 50% from pre-conflict levels, affecting the delivered cost of our products. While the market excitement has centered on thermal coal, seaborne met markets remain very constructive. First quarter benchmark pricing for premium hard coking coal averaged more than 25% above year ago levels and could be characterized as more mid-cycle after the temporary dip we saw in 2025. I'll note the stratification of prices across lesser grades of met coal has become more pronounced. Low-vol PCI is up a more modest 14% over a year ago, while high-vol A pricing was actually 12% lower in the first quarter than in quarter 1 of 2025.. Turning to the U.S. markets. Power demand has remained strong early in the quarter due to a very cold January. Henry Hub gas prices lagged as the quarter wore on and ultimately ran below the fourth quarter and year ago levels. Coal is still dispatched at a decent rate and U.S. coal demand was solid. We're working through the shoulder season and soft gas prices at the moment, but expect overall U.S. load growth to help balance that out as we begin to enter the strong summer burn. With that brief overview of the markets, I'll turn the call over to Mark.

Thanks, Malcolm, and good morning, all. In the first quarter, we recorded a net loss attributable to common stockholders of $32.4 million or $0.27 per diluted share, while delivering adjusted EBITDA of $82.5 million. Results were underpinned by outstanding performance from our seaborne thermal platform, which benefited from higher realized prices and strong demand from Asian markets. The seaborne thermal platform delivered 3 million tons, exceeding expectations and increasing export shipments by 200,000 tons. Realized export prices averaged $86.25 per ton, up more than 5% from the prior quarter, driven by higher Asian demand amid elevated LNG prices in the latter part of the quarter. Higher production from both Australian thermal mines helped reduce cost to $50.26 per ton, below the low end of guidance, resulting in a 25% adjusted EBITDA margin and $48.5 million of adjusted EBITDA. Seaborne metallurgical shipments totaled 2 million tons, 400,000 tons below plan due to the longwall ramp-up challenges at Centurion and unfavorably wet weather at the CMJV, partially offset by higher-than-anticipated production at Metropolitan, where we completed a longwall move ahead of schedule. Costs were higher than our guidance at $142 per ton, largely due to lower volumes at Centurion, partially offset by realized prices that increased 13% quarter-over-quarter. The segment recorded an adjusted EBITDA loss of $7 million as an otherwise strong quarter was reduced by $80 million from the Centurion ramp-up, including $10 million of additional commissioning costs. Our U.S. thermal business delivered $61.5 million of adjusted EBITDA in the first quarter. The PRB shipped 21.2 million tons, exceeding expectations. Costs were above guidance due to sales mix, which included additional shipments of higher heat coal from NARM and timing of certain repairs and maintenance costs. Net-net, costs outpaced higher average realized prices, resulting in lower margins in the quarter and $23.7 million of adjusted EBITDA. Other U.S. thermal shipped 3.3 million tons at better-than-expected costs, demonstrating continued disciplined cost control. I'm also pleased to report that Twentymile continued to perform well in its new longwall panel. Together, the other U.S. thermal mines contributed $37.8 million of adjusted EBITDA. Moving forward, like the rest of the industry, we are keeping a close eye on oil prices. I'll share a few points here for context. Peabody uses approximately 100 million gallons of diesel fuel a year, with the majority used in the U.S. at our large surface mines. Each $10 per barrel change in oil price impacts EBITDA by $6 million per quarter, ignoring potential benefits from higher coal prices. With the continuation of the Middle East conflict, we increased expected full year PRB costs $0.50 per ton to reflect the current forward curve. We also increased seaborne thermal cost guidance by $2 per ton to reflect the current price strip. We have not experienced any disruption to imported fuel deliveries in Australia, and we are working closely with our primary supplier to monitor continued availability. While higher fuel costs are anticipated across the business, the seaborne met and other U.S. thermal segments are expected to remain at beginning of year costs. A firm resolution of the Middle East conflict may result in an improved forecast with lower costs. Looking ahead to the second quarter, we expect seaborne thermal volume of 3 million tons, including 1.9 million tons of export coal, 300,000 of which are priced on average at $64.60 per ton. 1 million tons of Newcastle product and 600,000 tons of higher ash coal remain unpriced. Costs are expected to be between $57 and $62 per ton with approximately $3.50 related to higher fuel costs as well as a stronger Australian dollar and planned repairs and maintenance at Wilpinjong. We expect seaborne metallurgical volume of 2.3 million tons with realizations of 75% of the premium hard coking coal index. Costs are expected to continue at higher than full year run rates due to lower production at Centurion before achieving full longwall volume in the second half of the year. In the PRB, we anticipate shipments of 19 million tons at cost of $13.25, reflecting the traditional second quarter shoulder season and the $0.50 adjustment to higher fuel costs. Other U.S. thermal coal shipments are expected to increase to 3.4 million tons with costs at $45 to $49 per ton, in line with full year guidance. In closing, our first quarter results highlight the value of our diversified global assets. Strong performance from our thermal segments, both abroad and here in the United States, continues to generate substantial free cash flow. Peabody ended the quarter with just under $500 million in cash and total liquidity above $850 million. This financial position reflects the resilience of our balance sheet and provides financial flexibility to navigate near-term challenges, support our shareholder return program and continue to invest in long-term value creation. With that, I'll turn the call back over to Jim.

Thanks, Mark. As we look toward the rest of the second quarter, priority 1 is continuing the positive momentum at Centurion and progressing toward our targeted production rates in a safe and productive manner. Beyond Centurion, we remain focused on delivering strong performance across the broader mining portfolio while maintaining a rigorous cost discipline. Finally, we'll continue unlocking additional value from our extensive asset base over time. With that, operator, we are pleased to open up the call to questions.

[Operator Instructions] The first question comes from Chris LaFemina with Jefferies.

I just wanted to ask first on the PRB cost guidance. So second quarter cost is going to be a bit higher than the first quarter. But then the full year guidance is materially lower than what your first half average would be. And I wanted to understand how you're going to get there. I understand that part of it is, I would assume, a function of higher volumes in the second half of the year, and part of it is that on the strip, diesel prices, I guess, are a bit lower, but it is a substantial drop-off in costs and I just wanted to better understand that. That's my first question.

Chris, you're exactly right. You kind of answered your own question there for the PRB. Costs were higher in the first quarter a little bit, going higher in the second quarter, mainly due to diesel fuel. That's probably about a 75% impact in the second quarter, $0.50 impact over the full year. So you're right, that forward strip declines. That's the biggest change there on the PRB cost. We have lower volume. I think you mentioned lower volume as well, right? I mean second quarter shoulder season, we're looking at about 2 million tons less. So a big denominator difference there as well.

Okay. That makes sense. And then secondly, just on the balance sheet, I noticed that the restricted cash balance fell by like $33 million in the quarter. And I'm not sure I saw the offsetting decline in any associated liabilities. So I might just be missing something there, but what was going on with the cash balance?

Yes. The restricted cash, there was just a movement in how we collateralize some of those obligations. No change in the liabilities.

And the next question comes from Katja Jancic with BMO Capital Markets.

Maybe staying on PRB. I know that the prices are currently locked in or mostly locked in. Do your contracts in any way allow you to potentially share some of the cost burdens from diesel right now? Or is there an opportunity for that?

Katja, Malcolm here. Look, the majority of our contracts are fixed price contracts that don't have a fuel rise or fall.

And then if this environment continues, are you potentially looking at hedging any of the diesel costs? Or do you have any hedges in place?

Yes, Katja, we do not hedge diesel. We've looked at this over the years multiple times, whether fixed pricing with our suppliers or hedging it with derivatives is just not cost effective to hedge.

And maybe one more, if I may. You mentioned the potential for West Coast exports of PRB. Can you talk a bit more about right now currently, what the opportunity could potentially be in more near term?

Yes. Thanks for the question, Katja. Malcolm here again. Look, the potential there in terms of the coal quality is pretty much unlimited. This PRB coal quality is fantastic in terms of its sulfur level, in terms of its ash level. And what we've seen in Asia is a lot of power generating plants have been set up to burn on this type of coal. And that was originally based on Indonesian coal. Now Indonesian coal is being kept more domestically and also we're seeing grades decrease. So there's a real opportunity, particularly in terms of the environment and this high-grade PRB coal to be consumed in Asia. So it was really quite positive and exciting that we're able to work with the port operator down there and also the Union Pacific to do a trial shipment. And the potential there will be limited by the logistics in terms of the Guaymas port. But then also, you'd note that there are West Coast port opportunities currently being discussed and that is something that really encourages us as we move forward.

And the next question comes from Nathan Martin with the Benchmark Company.

Malcolm, maybe just sticking with you for a second. You mentioned about some of the additional seaborne thermal opportunities you're seeing in the market driven by conflict in the Middle East as well as Indonesia. So is there still demand and price out there? Or have you seen that retreat maybe some of the recent peaks?

Look, I think we're going to potentially go to the next level over the coming months. We've -- I mean the tide that lifts all boats is the Chinese import price. And we've seen that rally reasonably strongly, and I'm hearing appeals for API 5 around $100 a ton at the moment, which is over 1 year ago levels, that's probably $25 in excess of that. Now once that tide comes up, that will also support Newcastle pricing. And LNG pricing is still at quite a multiple as a fuel cost than seaborne thermal coal. And we're just starting to move into the summer in the Northern Hemisphere. So I think there's more to come.

Okay. Great. That's helpful. And then maybe going to Centurion. I know you guys obviously mentioned aiming to complete the commissioning and production ramp here in the second quarter. Can you talk a little bit more about the timing there? I think maybe Jim has mentioned, but is this kind of an end of quarter completion? How confident are you that the longwall should be up and running or fulfilled in the second half and when that might occur?

Nate, Jim Grech here. And we have a lot of confidence that's going to occur here in the second quarter. I'll give you a little detail around where we're at right now, how we see us getting through the month of May and then the month of June, why we have so much confidence. So right now, our plan gets us to optimize longwall automation by the end of May. And what do we mean by optimized longwall automation? That means we're all done with the commissioning of the equipment, and we are in regular production mode for our forecast. And so to get us to that position by the end of May [technical difficulty] in the coal seam. We have shared optimal position, both the floor and the horizon and the coal seam longwall face straighten level. So our goal is to get us to those conditions by the end of the month and we have made significant progress to getting to those conditions. But it is an iterative process, Nate, that we're in. We advance the shields, we align the shields. If there's any fortifying of the coal roof or face, we do that if needed. And we do another pass with the shield, we cut some coal and then we advance the shields again. So we're going through that process right now, advance the shield, align, fortify, cut, and we're having some very good success with that. And so we're going to keep repeating that process for the next few weeks until we get to this optimized longwall automation position. And then from there, we'll be running per forecast. So a lot of good progress made in the last 2 weeks. We're -- every day, we move further along with our plan. And we, again, feel very good about getting this completed by the end of May, getting out of this commissioning phase and getting into regular production mode starting in June.

Okay. That's very helpful, Jim. I appreciate that. And then maybe just one more, if I can. You guys had a small update on your rare earth and critical minerals project there. Maybe can we just get some thoughts around the potential time line for that development? You mentioned previously as well as today, the possibility of building a pilot plant. Again, just any updates on time line would be great.

Yes. So you're referring to the grant we got from the Wyoming Energy Authority to build a pilot plant, and we're looking at building at the moment at our Rawhide mine is the site at the moment, but there are some other sites being looked at it. So we expect the development operations and so on to take about 18 months. and then you're going to have some time after that of a year or 2 to get it up to full development of the plant. So we're going to work on the siting first and then initial construction and then get it operating, hopefully, at some extent, 18 months out and then over that 18- to 48-month time frame, just keep ramping it up and with the project. So that's what we're doing on that one project. I just want to remind you, though, that we've got several opportunities that we're pursuing. We've got this option-based approach because we've got multiple feedstocks, whether it's coal or overburden and looking at other of our mines. So we have other projects underway. We're not ready to talk about them yet, but this is the one here that we're talking about at the moment.

And the next question comes from George Eadie with UBS.

Jim, your audio was muffling, I think, before, so sorry if this is a bit of a repeat. But what specifically at Centurion were the electrical and mechanical issues experienced? And were there any issues with the shields not bearing the roof weight properly due to roof conditions or undulations at all in the roof?

Yes, George, I'm not sure why. I'm right next to the microphone, and I think I'm talking loud enough. I'll start screaming into this. Are you hearing me okay right now?

Yes, yes. I got you good.

Okay. If you hear me catching my breath because I'm talking at the top of my voice. So what we've had is a longer-than-anticipated commissioning period at the mine. So to get to the situations you talked about, during the initial commissioning, we encountered some unanticipated electrical and mechanical issues that we hadn't picked up during -- we did testing, we did a mini build on the surface to test the equipment. But once we got the equipment underground, put it together and put it under full load conditions, we started having some issues with it. So fundamentally, what happened with that is we had 8-year-old unused mining equipment. We put an updated technology in it and then we put it underground. And when I got under full load, we started having issues that we weren't anticipating electrically. And we had to troubleshoot that, order parts and repair. And once we got past the electrical issues, we had some mechanical issues with conveyors and shoots and so on. What I would call standard commissioning issues that you have with this type of situation in a new mine and equipment that's been sitting on the shelves for a while, all taking much longer than we had anticipated. So with that situation going in the longwall sitting, and what happened was the longwall was advancing very slowly during this commissioning period. So the slow progress of the longwall gave rise to some localized ground conditions where the longwall was sitting, we had moisture accumulating in some roof cavities above that, combined with the softening of the floor beneath the shield. So the roof conditions have been addressed with void fill and under control where we have the longwall right now in its current position. The floor conditions we've adjusted to, but what's happened is the -- with the floor conditions, we've got misalignment in a limited number of shields. And that really is where we are in the final stages of remediation that I had outlined to Nate is getting those shields in alignment. And the only way to do that is to advance the longwall, adjust the shields, advance the longwall, adjust the shields. And that's going to take us another week or 2 to do that. So we anticipate getting through that by the end of the month. And as we -- each time we advance, we progressively improve with our remediation. And once we get a little further along here, we get on to some fresh ground underneath those shields, we'll be going at forecasted rates. So George, did I answer the question you had asked there?

Yes.

I'm assuming you...

Exactly. Yes. No, that was great. Appreciate all that. And so are you guys like testing the shields to make sure they're carrying the roof load? Is that something you can do and are doing, I guess?

Yes. The shield themselves are performing well. It's just they're out of alignment, and we just have to get them straightened out between the floor and the roof. That's really what's going on here at the moment, George.

Okay. That's super clear. And then maybe one quickly for Malcolm. Just margins in the PRB just over $1 a ton, a few questions on it before, and we've guided down there. Are there risks to margins getting back sort of $2 and higher going forward with U.S. gas prices at $2.80 and cost pressures impacting on the other end, too?

Yes. Look, with where oil prices are at the moment, margins are being challenged and also this quarter with lower volumes being in shoulder season. But one thing that -- what's pretty evident is that electricity demand is continuing to increase. And as that -- and I think we've just seen the statistics for April. So with this increased demand, we get out of shoulder season, get into the summer. I still expect the spot market to be quite robust and for pricing as we move forward to reflect this higher cost base because I don't think anybody is on their own in terms of the dirt that needs to be moved and the cost of that diesel. So it's a function of the higher cost base being reflected in new deals and the like as we work through that.

Yes, George, I might just add to that. If you look at the implied guidance, the costs and the additional volumes coming in the second half of the year, we're going to be back to margins rate within spinning this into a few dollars a ton.

And the next question comes from Nick Giles with B. Riley Securities.

A lot of my questions have been answered. But just maybe on the seaborne met cost revisions, I think most of which were driven by Centurion timing being pushed out. But can you just touch on the other operations and where costs stand today at those mines? I think diesel isn't as impactful as the PRB, but I was wondering if anything has changed as far as input costs at your kind of non-Centurion operations?

Yes, Nick, I think I'll start with the 2 changes we made to the guidance for the full year in the Thermal segment. So PRB is up $0.50 on a full year basis. That's entirely due to higher diesel pricing. Seaborne thermal as well, up $2 a ton for the full year, entirely due to higher diesel pricing. The seaborne met, that is up $15 a ton, and that's entirely due to the lower volume at Centurion. Now there is some higher diesel costs, obviously, in met and other U.S. thermal, but that's a much smaller use, about 2/3 of our oil in both regions. 2/3 of the U.S. oil or diesel is used at the PRB and about 2/3 of Australian fuel is used in the Seaborne Thermal segment. So the seaborne met and the other U.S. thermal, much smaller impact from diesel, and we were able to maintain those original cost guidance ranges.

Got it. Very helpful. I appreciate that, Mark. And then maybe just one on the Centurion product itself. Can you just talk about how the commercial process has gone to date with customers? How much is contracted? How much could -- is left to still be contracted? And then do you feel that with the higher freight rates globally that Centurion has become more competitive? Or how are you thinking about kind of percentage realization in terms of PRB?

Yes. Thanks for the question, Nick. Look, generally, discussions have gone very well because this product is the highest quality premium hard coking coal at around an 8% to 8.5% ash. And in terms of where it's being sold, traditionally, North Asia has been a big customer when this mine was producing last decade. There's strong demand there. But really, the main focus is on India, and we've concluded a number, probably 8 or 9 contracts there. In terms of how contracted I am for the year, I'd like to treat that as commercially sensitive. So -- but there's plenty of demand there for that product. Hopefully, that answers your question.

And the next question is a follow-up from Christoph LaFemina with Jefferies.

Just one quick follow-up. If you look at the -- like the outlook for the business, if you hit your operational targets, you're going to be generating lots of free cash flow in second half of this year and into 2027. Your balance sheet is very strong. Your share price has been under some pressure, but it really seems like it's a timing issue on the cash flow rather than anything more structurally problematic. And yet you have an opportunity in the market to buy back your stock at a relatively inexpensive level. So I was wondering how you think about the share price weakness and how you can defend the stock? Maybe that's the way to think about it, but can you take advantage of an opportunity here where the market is not pricing in the cash flow that you guys are going to generate and maybe the opportunities for you to buy back your stock at this relatively inexpensive level?

Yes, Chris, we share your outlook for the business, certainly when [indiscernible] comes back online or gets online at full production rates in the second half of the year. There will be a substantial amount of free cash flow in that second half of the year. I think there are a couple of opportunities, buying back shares is one, but also looking at our 2028 convert that's outstanding and addressing maybe some of the dilution there as well.

And next question is a follow-up with George Eadie with UBS.

Jim or Malcolm, when will we get some details on this PRB West Coast opportunity, I guess, chasing potential tons you could ship washing, cleaning costs, CapEx and sort of time lines and all the various factors for us to potentially model it up?

Look, I'll start and maybe Jim could give some further details. Look, this cargo is going to go out in May, and we'll get customer feedback. We have another customer visiting our PRB mines next -- I think it's next week or the week after. We're in a detailed qualification process there. And we'll discharge trains and the first one is discharged down in Mexico this week, and we'll see how that goes. We'll load it on the ship and see how that goes and then get the ultimate feedback from the customer. One thing is for sure is that there are opportunities and people are really focusing on this and the railway, particularly Union Pacific, is working with us really constructively. That's encouraging. And then you're also hearing about other West Coast port opportunities. But exactly where we go with the Port of Guaymas, that's going to be a little bit of a suck and see. Let's see how the port performs and the like. But this is more of a proof of concept and the like. In terms of CapEx and the like, we'll be leaving other promoters to develop ports and do those things. We'll be a user of those ports and the like. So I hope I haven't set out a light here. I'll just check with Jim if there's anything he'd like to add.

No, Malcolm. I think the thing to take from this, George, is Malcolm said proof of concept, and most importantly, is there a market for this coal? And as Malcolm pointed out, there's a significant almost unlimited market in terms of what the PRB can produce and move as far as demand because of the comparably -- very favorable comparison to Indonesian quality coal, which is big on the export market. So the opportunity is significant. And the proof of concept is us working with the Union Pacific Railroad. We have been very good to work with the U.S. government, the Mexican government. Can we then do the logistics to move the coal to this very large market? And we've done that. So the next steps are how do we scale this up? How do we get significant tonnages? And whether that's through Guaymas or other ports that are being looked at on the West Coast that are being looked at actively. And I think there's some great opportunity there for those ports to move those Western coal. So there's a lot more opportunity to come. Is it on the horizon like in the next 3 to 6 months? No, there's nothing significant because you need to get to port capacity there. But the demand is there. The demand is not going away. The ability to work with the rail carriers and the U.S. government to develop these opportunities is there. So there's a lot of good potential for us out into the longer term, but not just in the near term.

Yes. Okay. Great. And just on that, what is the port capacity you guys could tap here? Is it sort of 5 million to 10 million tons? Is that the right range for me to think?

Well, I think it's what's the port capacity potential. Guaymas could get to those ranges or slightly higher and other ports that are being looked at on the West Coast would be at the upper end of that range.

And this concludes the question-and-answer session. I would like to turn the conference back over to Jim Grech for any closing comments.

Thanks to everyone for your time today as well as your long-standing support. We're going to get back to work and look forward to keeping you apprised of our progress.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.