PEABODY ENERGY CORP 10-Q

Item 3. Quantitative and Qualitative Disclosures About Market Risk. Foreign Currency Risk The Company has historically utilized currency forwards and options to hedge currency risk associated with anticipated Australian dollar expenditures. The accounting for these derivatives is discussed in Note 7. “Derivatives and Fair Value Measurements” to the accompanying unaudited condensed consolidated financial statements. As of June 30, 2021, the Company had currency options outstanding with an aggregate notional amount of $580.0 million Australian dollars to hedge currency risk associated with anticipated Australian dollar expenditures over the nine-month period ending March 31, 2022. Assuming the Company had no foreign currency hedging instruments in place, its exposure in operating costs and expenses due to a $0.10 change in the Australian dollar/U.S. dollar exchange rate is approximately $130 million for the next twelve months. Based upon the Australian dollar/U.S. dollar exchange rate at June 30, 2021, the currency option contracts outstanding at that date would limit the Company’s net exposure to a $0.10 unfavorable change in the exchange rate to approximately $104 million for the next twelve months. Other Non-Coal Trading Activities — Diesel Fuel Price Risk Diesel Fuel Hedges. Previously, the Company managed price risk of the diesel fuel used in its mining activities through the use of derivatives, primarily swaps. As of June 30, 2021, the Company did not have any diesel fuel derivative instruments in place. The Company also manages the price risk of diesel fuel through the use of cost pass-through contacts with certain customers. The Company expects to consume 75 to 85 million gallons of diesel fuel during the next twelve months. A $10 per barrel change in the price of crude oil (the primary component of a refined diesel fuel product) would increase or decrease its annual diesel fuel costs by approximately $20 million based on its expected usage.