Seeking Alpha: Arch Coal Still Looking For Light At The End Of The Tunnel

Badly beaten-down stocks can often look quite tempting to investors who appreciate how often the Street overshoots both during good times and bad. In the case of coal, though, that remains a difficult trade. Asian producers like China Shenhua (OTCPK:CSUAY) and PT Bukit Asam (OTCPK:TBNGY) continue to perform relatively well (as I've written here and here), but weak met coal pricing and ongoing rail disruptions in the Powder River Basin are bedeviling Arch Coal's (NYSE:ACI) operations.

Very few analysts are willing to stick their necks out for Arch Coal at this point, with five Strong Buy/Buy ratings matching the Underperform/Sell ratings (and 11 in the middle at "Hold"), and the short interest is around 15%. There is certainly still a real risk that met coal prices don't recover as expected (or should I say hoped?) in 2015 and beyond, and likewise a risk that domestic thermal demand declines further.

It's also very difficult to construct a model wherein these shares look truly cheap. All of that said, Arch Coal has about $1.25 billion in liquidity today, no major maturities until 2018, and may be able to limit the cash burn to $500 million between now and a return to positive free cash flow in 2017 or 2018. I'd much rather own China Shenhua, PT Bukit Asam, Peabody (NYSE:BTU), or Cloud Peak (NYSE:CLD) from a safety/certainty standpoint, and I still think Arch Coal is looking at a very difficult road, but I suppose there's a play here for investors who think that coal pessimism could bottom.

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Arch Coal Still Looking For Light At The End Of The Tunnel

Seeking Alpha: Bukit Asam's Production And Delivery Growth Offset Weak Pricing

The coal market has been lousy for most of the major U.S. and international producers, but PT Tambang Batubara Bukit Asam ("Bukit Asam") (OTCPK:TBNGY) has been a notable exception. Between organic production growth, strong domestic prices, and good cost control, Bukit Asam shares have jumped 50% since I wrote about the company in January, handily beating China Shenhua (OTCPK:CSUAY), Peabody (NYSE:BTU), and U.S. producers like Cloud Peak and Arch Coal (NYSE:ACI). I do see some long-term upside from the company's aggressive production growth plans and an eventual seaborne thermal coal price recovery, but I don't see as much near-term value in the shares right now.

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Bukit Asam's Production And Delivery Growth Offset Weak Pricing

Seeking Alpha: High Costs And Leverage Make Yanzhou Coal A Risky Play On Chinese Coal

One way to sum up the general sentiment towards Yanzhou Coal (YZC) is to observe that the shares are down more than 15% over the past month while coal prices in China have increased by around 20%. There are reasons for more optimism about coal prices going into 2014, but Yanzhou's high production costs and high leverage make this a risky and volatile play on higher prices relative to peers like China Shenhua (OTCPK:CSUAY) or China Coal (OTCPK:CCOZY).

I can understand if Yanzhou jumps out as a contrarian play on coal given that generally negative sentiment on the stock. While I won't rule out the possibility that a rising tide of coal prices will lift this boat, I don't see enough undervaluation to compensate for the risks, nor the company's history of taking not-so-shareholder friendly actions.

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High Costs And Leverage Make Yanzhou Coal A Risky Play On Chinese Coal

Commodity HQ: A Deeper Look At China's Commodity Industry

Although the geographical size of China is perhaps not that difficult for North Americans to appreciate, their population is another matter. As China has become the second-largest economy in the world, it is without question transformed into an enormous force in the world’s commodity markets; so much so, in fact, that the recent commodity supercycle is now generally seen as a byproduct of China’s emergence.

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A Deeper Look At China's Commodity Industry

Commodity HQ: A Deeper Look At China's Commodity Industry

Although the geographical size of China is perhaps not that difficult for North Americans to appreciate, their population is another matter. As China has become the second-largest economy in the world, it is without question transformed into an enormous force in the world’s commodity markets; so much so, in fact, that the recent commodity supercycle is now generally seen as a byproduct of China’s emergence.

Please read more here:
http://commodityhq.com/2012/a-deeper-look-at-chinas-commodity-industry/

Investopedia: What's Ailing Coal Stocks?

Coal has gotten very cold very quickly. One of the hottest commodities only a year ago, it feels as though the bottom has fallen out of many of these stocks. If coal follows the common commodity pattern, the overshoot at the top of the market will be coupled by a dive and investors will have the opportunity to pick up some real bargains. Investors thinking that today is the day to buy, should remember that another global recession presents a major downside, even from today's prices, but there are many stocks approaching interesting price levels.


What's Gone Wrong?   
A lot of the melt-up in coal was fueled by the economic recovery, as better business conditions promised better demand, both for thermal coal, used to produce electricity, and metallurgical, or met coal, used to produce steel. Since the spring of this year, though, investors have begun to not only accept the end of the recovery, but fear a potential slip back into recession. That has led to a great deal more caution at steel companies and lower orders at utilities. (For related reading, see Industries That Thrive On Recession.)


Read more below:
http://stocks.investopedia.com/stock-analysis/2011/Whats-Ailing-Coal-Stocks-ANR-WLT-ACI-BTU-PVR-KOL-JRCC1011.aspx

Investopedia: Can ADA-ES Make The Improbable Possible?

"Clean coal" is typically put in the same box as military intelligence or good government - something everybody would like to see, but is ultimately about as good of an investment concept as unicorn ranches. Not for lack of trying, but many clean coal technologies have risen up and then faded away when the real-life results didn't match the lofty promises of controlled bench-top experiments and the cost advantages disappeared in a puff of smoke.


All of that said, ADA-ES (Nasdaq:ADES) keeps trying to crack the code and recent test results have sent the stock back up sharply. The question still remains, though, whether this tiny Colorado company can succeed where so many have failed and where most of the world's chemical companies don't even see value in trying. (For related reading, see Can Business Evolve In A Green World?)

The Latest Hope
ADA-ES recently announced that a new technology called M45 showed some encouraging results in full-scale tests with refined coal. According to the company, M45 lowered NOx emissions by more than 20% and mercury emissions by more than 40%. As the company dutifully noted, this would qualify for special government tax credits that would arguably make the technology interesting from a commercial perspective.


Read more here:
http://stocks.investopedia.com/stock-analysis/2011/Can-ADA-ES-Make-The-Improbable-Possible-ADES-HW-DOW-DD-GE-APA-WMV0927.aspx

Investopedia: Digging Into A Joy Global Rumor

About a month ago I reviewed mining equipment company Joy Global's (Nasdaq:JOYG) earnings and speculated that "It might also be worth wondering, though, whether the company would consider additional deals - say like the acquisition of International Mining Machinery, China's leading mining equipment company - to expand into particular regional markets." Now Bloomberg, Reuters, and several other sources are reporting rumors that the two companies are in advanced merger discussions. 

The Deal That May Be  
Prior to these rumors leading to a halt in trading of International Mining Machinery's (Nasdaq:ICMHF.PK) shares on the Hong Kong exchange, the company carried a $1.1 billion market valuation. Although IMM's share price has been depressed a bit on fears of a slowdown in economic activity and the widespread expectation that major owner Jordan (which owns 41% of shares) will be selling shares, Joy Global will likely need to offer something on the order of $1.3 billion to get a deal done. 


To read the full article, please click below:
http://stocks.investopedia.com/stock-analysis/2011/Digging-Into-A-Joy-Global-Rumor-JOYG-CAT-RDC-YZC-TWI-TEX-KMTUY.PK0718.aspx