Citi Has Buy Rating On Peabody (BTU)

Citi Investment Research has a Buy rating and $57 price target on shares of Peabody Energy Corporation BTU. In the research note, Citi writes, "BTU announced that the board has approved the expansion of its Gateway mine in Illinois (Mid West), boosting capacity to 4.5 mln tons annually compared to 2009 production of 3.3 mln tons. This expansion plan will also extend Gateway's current 5.5 year mine life by 16 years." It goes on to say, "Considering cash margins in the Midwest of roughly $10/ton in recent quarters, the expansion would theoretically contribute modest EBITDA of $12 mln per year vs our estimated 2010 EBITDA of $1.8 bln. However given depleting mines at Somerville North (2.0 mln tons produced in 2009 vs assigned reserves of 2 mln tons) and Viking (1.6 mln tons produced in 2009 vs assigned reserves of 7 mln tons), this Gateway expansion helps to maintain BTU's Illinois Basin production profile." Shares of Peabody Energy lost 41 cents yesterday to close at $48.78, a loss of 0.8%.