Last friday, Atlantic Coal (AIM:ATC) one of only a few globally listed anthracite miners, and one of just a limited number of AIM listed coal miners, announced a major order for six Komatsu Model HD785-7 100 ton haul trucks and two CAT D9 dozers.
The market seems to have really missed the significance of this news by Atlantic Coal at a time when the anthracite sector in the USA has been posting some good results. I draw people's attention to a recent article in the Republican Herald a daily newspaper serving
Pottsville, Schuylkill County, the main anthracite coal production regions in Pennsylvania, with Greg Driscoll, president and CEO of Blaschak Coal Corp, one of the leading US anthracite miners. Driscoll, reported that Blaschak had seen record production output in 2013 and that the anthracite community at large in Pennsylvania was quite optimistic about prospects for the sector heading into 2014. The full interview can be seen at;
http://republicanherald.com/news/local-coal-companies-producing-record-numbers-1.1639580
Share Price Prognosis:
I would see the order for this additional equipment as being a strong sign by management that demand and pricing for anthracite will remain robust throughout 2014 in line with the sentiment put forward by Blaschak who are backed by the private equity group Milestone Partners, http://www.milestonepartners.com and where this private company has no need to indulge in any PR share ramping.
The idiosyncratic risks for Atlantic Coal appear to be lowering as the company is now operationally profitable and appears to be lowering its debt risk. The average daily share volume traded through the stock is circa 14 million daily about 26,000 stg in real terms, making it at least for AIM, one of the more liquid stocks on the market. The US is certainly heading out of recession and the economy is on the move. I know this from personal experience given that I am a significant investor in the US, but also having just returned from a 6 week visit to the Midwest, can testify that there is a feel good factor heading back to the market.
Whilst the recent weather in the US may have had some impact on mining activities (coal washing plants hate freezing weather), the longer term prognosis for ATC looks good and with uncertainty surrounding anthracite production from Russia and the Ukraine, because of geo-political risk, the ability for cheap anthracite imports to head to the US may well be set back. Anthracite is also a specialist coal and has a number of sales outlets, and is not just exposed to thermal heating market demand, but that of the steel sector where it is used as a carbon additive and reductant, the industrial sector where it is used in water filtration (A massive growth sector in the US) and in diverse demand markets such as bottle colouring, yes you might actually be buying some Atlantic Coal when you next purchase a Budweiser!!!
Anyway, thoughts are my own as usual, but still born out of more that 20 years of successful investment experience.
Atlantic Coal plc / Index: AIM / Epic: ATC / Sector: Mining
28 February 2014
Atlantic Coal plc ("Atlantic" or the "Company")
Purchase of New Equipment to Significantly Increase Production
Atlantic Coal plc, the AIM listed open cast coal production and processing company with activities in Pennsylvania, USA, is pleased to announce that it has ordered six Komatsu Model HD785-7 100 ton haul trucks and two CAT D9 dozers. This equipment purchase is expected to enable the Company to continue to increase the run-of-mine ("ROM") production profile at its Stockton Colliery, a producing opencast anthracite operation in Pennsylvania ("Stockton"). The purchase of the equipment is to be funded through a lease purchase agreement at a total cost of $8.5m over six years.
Atlantic Managing Director, Steve Best, said, "We anticipate that the acquisition of the new equipment will assist with our operational efficiency and enable us to meet our production goals for the immediate future. This should allow us to increase our production of ROM coal to the wash plant and maximise the circa 1.8* million tons defined anthracite reserves at Stockton."
"We look forward to providing further updates on our progress at Stockton and our Pott and Bannon project, together with our wider strategy to increase our presence in the US anthracite industry, at the appropriate time."
*As announced on 11 June 2013. The revised estimate is subject to completion of drilling to confirm the extent of prior by-passed coal on the south wall of the mine and development of an updated mine plan for recovery of remaining coal.
