PEABODY ENERGY CORP 10-Q

Item 3. Quantitative and Qualitative Disclosures About Market Risk. Coal Pricing Risk As of September 30, 2022, the Company held coal derivative contracts related to a portion of its forecasted sales with an aggregate notional volume of 1.0 million tonnes. Such financial contracts may include futures, forwards and options. Included in this total are 0.9 million tonnes related to financial derivatives entered to support the profitability of the Wambo Underground Mine as part of a strategy to extend the mine life through mid-2023. Of this total, 0.3 million tonnes will settle in 2022 and 0.6 million tonnes will settle in 2023. The Newcastle thermal coal index was $414.80 per tonne on September 30, 2022, and the Company had posted $379 million of variation margin for the related derivative contracts at such date. A change in the Newcastle forward curve of $100 per tonne would increase or decrease the Company’s variation margin requirement by approximately $86 million and result in comparable unrealized gains or losses. 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 6. “Derivatives and Fair Value Measurements” to the accompanying unaudited condensed consolidated financial statements. As of September 30, 2022, the Company had currency options outstanding with an aggregate notional amount of $855.0 million Australian dollars to hedge currency risk associated with anticipated Australian dollar expenditures over the nine-month period ending June 30, 2023. 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 $208 million for the next twelve months. Based upon the Australian dollar/U.S. dollar exchange rate at September 30, 2022, 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 $201 million for the next twelve months. Diesel Fuel Price Risk Previously, the Company managed price risk of the diesel fuel used in its mining activities through the use of derivatives, primarily swaps. As of September 30, 2022, 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 95 to 105 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 $24 million based on its expected usage. 54 Table of Contents