Peabody Energy has been forced to raise $150-million to support potential near-term liquidity requirements, after the recent rally in coal prices resulted in the US miner posting an additional $534-million to satisfy margin requirements for its derivate contracts.

The coal major currently has derivative contracts of 2.3-million tons, the majority of which were entered into in the first half of 2021 and relate to 1.9-million tons of production at the Wambo mine that supplies the seaborne thermal market.

Peabody put in place hedge contracts to support the profitability of the mine, securing anticipated average prices of $84/t through mid-2023.

However, high demand and tight supply for coal globally had resulted in a substantial increase in seaborne thermal coal prices, which had been amplified by the Russian-Ukraine conflict. The Newcastle financial price for March closed at $419.50/t on March 4, which is 248% above the closing index price of $169.17/t on December 31, 2021. 

Peabody said that, with the exception of the 1.9-million metric tons at Wambo priced at $84/t, export sales from the seaborne thermal segment were largely unpriced and would benefit if the current pricing environment persists, the miner stated.

In 2021, Peabody's seaborne thermal segment exported 8.7-million metric tons and generated revenue of $762-million at an average realised price of $87.51/t.

The company said the new credit facility, from Goldman Sachs, along with available cash would support the near-term liquidity requirements in the event of additional increases in the underlying market coal price. 

Under the company's derivative contracts, cash collateral is returned to the company upon reductions in the underlying market coal price or as the company delivers seaborne thermal coal into the market at spot prices. Further, the company said it expected to generate significant operating cash flows from unpriced volumes based on its current operating plans, if the current market dynamics persisted.

The credit facility would be a senior, unsecured obligation of Peabody, which would mature on April 1, 2025, and would accrue interest payable at 10% a year on drawn amounts. 

Peabody’s stock fell 16.5% on Monday.