A Diamond in the Rough
June 2019
Peabody’s North Antelope Rochelle Mine (NARM) holds a lot of significance, both in the US and globally. NARM is the largest coal mine in the world by reserve, followed by its neighbor: Arch Coal’s Black Thunder Mine, which sold 70.5Mt of thermal coal in 2017. NARM has been in production since 1983 and produced over 2bn tons since opening. Over 1,300 people and 300 contractors are employed by Peabody to operate its Wyoming-based operation, making it one the state’s largest employers.

The mine is an open cut—or surface—operation located 65 miles south of Gillette in the Powder River Basin, Wyoming. The mine sold 98.4Mt of coal last year, over half of Peabody’s 182.1Mt total coal production for this year. According to the company, the mine holds some 1.7bn tons of proven and probable reserves as stated by the company’s latest annual report.



Peabody runs another two mines in the Powder River Basin: the Caballo surface mine, which sold 11.3Mt of thermal coal last year; and the Rawhide surface mine which sold 9.5Mt at the same period. NARM is by far the biggest coal producer for Peabody, with 83% of thermal coal coming from NARM for the company’s Powder River Basin segment. The output from NARM makes Peabody’s Powder River Basin segment the biggest producer of coal, as shown by the pie chart below:

The Powder River Basin is a major coal-bearing geologic structure, believed to have formed around 60 million years ago, and spans 190km from east to west and 320km from north to south—hosting approximately 40% of the country’s coal reserves. The coal seams of the mine—which lie within the Wyodak-Anderson coal zone—are 18.3-24.4m (60-80ft) thick and located 30.5-122m (100-400ft) below the surface, with the seams dipping at 0-2 degrees to the northwest, making it ideally suited for surface extraction methods.

The coal found in the Powder River Basin is classified as ‘sub-bituminous’ and contains an average calorific value of approximately 4,723kcal/kg, ash volumes of 6.6% air-dried basis and Sulphur at 0.4% air-dried basis.

Coal is mined using different methods: dozer/casting, dragline and traditional truck/shovel method. Approximately one quarter of overburden is removed by cast blasting and draglines, while the remaining overburden is removed with the traditional truck-and-shovel mining method—the mine has three draglines and five truck-and-shovel fleets at its disposition for coal extraction. Once the coal has been extracted, it is crushed and conveyed to the silos before transportation by trains from the load outs capable of handling 10,000t of coal an hour. 



Peabody’s coal supply agreements are primarily with electricity generators—most of the company’s thermal coal sales are made under long-term coal supply agreements. However, the company did notice its clients’ growing inclination to seek contracts of shorter duration.

Revenues from Peabody’s Powder River Basin, Western US and Midwestern US segments accounted for 52%, 53% and 59% of the company’s coal supply agreements revenues for the years ended December 31, 2018, 2017 and 2016 respectively; sales from the seaborne metallurgical mining and seaborne thermal mining segments accounted for the remaining coal supply revenues.

In its latest annual report, Peabody states that it aims to continue selling coal from its thermal coal mining segments under long-term agreements, and that its approach consists of selectively renewing or entering into new long-term supply agreements when market conditions were favourable.