Coal news and updates

Coal producer Alpha Natural Resources ( ANR ) announced that its unit AMFIRE Mining Company, LLC has completed the divestiture of most of its assets to Rosebud Mining Company.  An agreement was reached between the parties during the third quarter and the deal was completed by 2014 on schedule. 

 

The total consideration of the transaction was $86 million including $75 million in cash and the assumption of certain liabilities. The mines which were sold had been generating negative free cash flow, so the decision to exit these operations and concentrate on its core business looks to be a prudent move. 

 

The assets which were sold include 10 mines and 4 preparation plants and loadouts. These are located in Cambria, Centre, Clearfield, Elk, Greene, IN and Somerset counties, PA. AMFIRE Mining Company has retained two mines - Emerald and Cumberland - located near Waynesburg, PA. 

 

A supply glut in the global markets has pulled down thermal and metallurgical coal prices. Stringent regulatory measures to lower carbon emission from power generating units will lead to higher usage of natural gas and less and less use of coal. In addition, the World Steel Association does not project a striking increase in steel usage in 2015 due to lower-than-expected demand from the developing and emerging markets. 

 

Given the softness in the coal market, operators like CONSOL Energy Inc. ( CNX ) have already shifted their focus to the natural gas business. Some coal mines have been idled to lower operating costs and cope with the dismal market. Selling out non-core assets is also a viable option, as exercised by Alpha Natural Resources. 

 

Alpha Natural Resources currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the space are Alliance Resource Partners LP ( ARLP ) and Hallador Energy Company ( HNRG ). Both carry a Zacks Rank #2 (Buy).

 

 

Source: http://www.nasdaq.com/