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Coal Investors Partying Like It's 1999

by: David Zanoni May 12, 2008 | about stocks: ACI / ANR / BTU / MEE / PCX    

David Zanoni

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We all remember the internet stock boom in 1999. Investors made a lot of money and there was no end in sight for stock prices that year. Euphoric feelings had the bulls on parade on Wall Street. Recently, the energy bull market has created a similar euphoric feeling for investors of coal stocks.

Coal stocks such as Massey Energy (MEE), Peabody (BTU), Arch Coal (ACI), Alpha Natural Resources (ANR), and Patriot Coal (PCX) saw their stock price double or in some cases triple in the last year. The dirty, filthy, black stuff has coal investors dancing the funky-COAL-medina. Good old coal is cheaper to run a power plant than oil or natural gas, so utility companies throughout the world love using it. Coal miners in Pennsylvania can earn over $70,000 a year to keep up with the demand. Recently, every time these stocks dip in price, a buying opportunity is created.

The problem: coal pollutes the air more than the other fuels so its continued use will be subject to stricter clean-air standards and the political policies that will enforce those standards. So, coal investors will need to keep abreast of all new energy policies in the U.S. and abroad to gauge how long the coal party will last. However, for now, they can keep partying like it's 1999 and enjoy their gains.

Position: No current position in coal.

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This article has 9 comments:

  •  
    May 12 07:44 AM
    You dog face must be short

    cover now . tgis stocks will go way up. will be worse for you. And ypu lnow?

    You are holding short position in personal account
    Reply
  •  
    May 12 10:50 AM
    I understand the article.
    Can someone explain the comment ?
    Reply
  •  
    May 12 12:31 PM
    I'm trying to correlate these articles.
    www.chron.com/disp/sto...
    www.eia.doe.gov/cneaf/...

    The first says Japan pays $250 per ton for metallurgical coal.
    The second says Northern Appalachian metallurgical coal sells for $110 per ton.

    Does that mean it costs $140 per ton to ship to Japan? Or does this mean Japan's scarcity might soon cause ANR's precious coal to double in price?
    Reply
  •  
    May 12 01:13 PM
    @trimagna
    the price of coal varies a lot like oil depending on energy content & sulpher.
    sweet oil is $126
    canadian oil is heavy & sour and $60
    coal can vary like that too.

    ANR was $16 last year, up 400%
    it's hard to impossible to build a new coal electricity plant
    in the US.
    the future is not good, this is just a part of the commodity boom
    Reply
  •  
    May 12 02:46 PM
    monday news, one more coal plant bites the dust:

    Power plant plan fizzles. BP (BP) and Rio Tinto (RTP) cancelled a plan to build a $1.5-2B coal-fired power plant in Australia. The plant was canned after the firms discovered rock formations in the area would not fully seal-in carbon dioxide deposits.
    Reply
  •  
    May 12 05:12 PM
    The $110 value for Northern Appalachian is for utility coal which is prevalent in Northern Appalachia. The coal I help mine is in Southern Appalachia. That coal is metallurical coal. Met coal is much rarer and does not exist in many high-seam areas, whereas utility or steam coal is in more abundance and exists in higher seams. This makes utility coal easier to mine, ergo production is more brisk, which keeps the value lower than met coal.
    Reply
  •  
    May 13 12:53 AM
    ANR is an excellent LT investment in the coal sector. It,s the largest U.S. supplier of met coal & shipped to 17 different countries last quarter. They report that they have 21 million tonnes of met coal that is either unpriced or uncommitted for 2009 & 2010. For those investors/speculators who want a low priced idea in the sector, I suggest Western Canadian Coal Corp. symbol: WTN.TO, which trades on the Toronto Exchange at about $6.00. The interesting aspect of this company is that they announced on May 7 that they negotiated a majority of their 2008 hard coking coal contracts at an aver. price above $300 per tonne ( 365% above prior prices ) and a majority of their 2008 low-vol PCI ( pulverized coal injection coal ) at approx. $248 per tonne ( 350% above prior prices ). CEO John Hogg says " company should be producing significant cash flow shortly "--well I guess so !! WTN is 45.73% owned by Cambrian Mining PLC , which trades on the LSE under the symbol CBM.L at a price of 194.00 GBP. WTN plans to increase their capacity for high quality met coal which now stands at 3.7 million tonnes per an. They recently added 15.7 million tonnes , or 18% , to their coal reserves. These 2 stocks could be real winners over the next several years--or until supply of met coal exceeds demand. I have positions in all 3 companies mentioned.
    Reply
  •  
    May 13 07:53 PM
    Own WTE.UN on the TSX.
    That is the way to play coal and more importantly its international exposure.
    Don't worry about coal being outlawed. It is the same as oil. When enough money is throw at the politicians, they can have a sudden "change of heart".
    Reply
  •  
    May 15 08:55 AM
    Check out Babcock Power and its commitment to clean coal via Thermoenergy's TIPs technology. This is the real under the radar coal play. Put tmen.ob on your watch list
    Reply
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