A near-term, sustained rebound in coal stocks may be little more than wishful thinking. It's essential that investors understand key factors underlying the coal market and be cautious when reading bullish articles.
Yes, the coal stocks have been slaughtered from their 52-week highs. However, consider this in the framework of other natural resource sectors. Risk-off strategies are impacting not just coal, but iron ore, copper, gold, silver, uranium and more »
Gold, as measured by the SPDR Gold Shares ETF (NYSEMKT: GLD) is down a remarkable 30% from its 52-week high. However, that performance pales in comparison to the dismal showing of Barrick Gold (NYSE: ABX), Newcrest Mining (NASDAQOTH: NCMGY.PK), Eldorado Gold, (NYSE: EGO), Compa, "BVN," and AngloGold Ashanti (NYSE: AU), each down at least 60%!
Beware the Elevated Dividend Yields
Unlike GLD, four of these five majors pay stock dividends more »
Benchmark coking coal prices are down 56% from a quarterly price of $330 per metric tonne in mid 2011 to $145 per tonne for the July-Sept, 2013 period. This depressed level is widely believed to be below the marginal cost of production of roughly $175-$185 per tonne. However, spot prices have been below that level for quite some time, suggesting that the true marginal cost might be closer to more »
It's well known that the gold majors are suffering from elevated all-in costs after years of reckless expansion into high risk countries and exploration overkill. Over the past six months, silver, gold, copper and platinum prices are down 34%, 24%, 11% and 10% respectively. Over the same period, oil prices are up 10%. Mining cost inflation is as big a problem as weak demand and resource nationalism.
Typically When more »
Master Limited Partnership Alliance Resource Partners LP (NASDAQ: ARLP) is down 12% from its recent high unit price of $78.5. At today's price of about $68, the units are yielding 6.6%, which is superb for a coal producer. Superb that is, if the distribution is not at risk of being cut. Not only is Alliance's distribution safe, it has risen at a compound annual growth rate more »
It's well known that the gold majors are suffering from elevated all-in costs after years of reckless expansion into high risk countries and exploration overkill. Over the past six months, silver, gold, copper and platinum prices are down 35% and 23%, 14% and 12% respectively. Over the same period, oil prices are up 8%. Mining cost inflation is as big a problem as weak demand and resource nationalism.
Typically more »
Natural Resource Partners, LP (NYSE: NRP) a Master Limited Partnership, or "MLP," continues to make strong progress diversifying from the leasing of its owned coal reserves. Natural Resource Partners recently presented at an industry conference. Please see the latest corporate slideshow here.
In 2005, 54% of total revenues came from steam coal royalties in central Appalachia. Pro forma for the company's February acquisition of a 49% interest in OCI more »
Investors looking to play a beaten down sector like coal need to understand the difference between Market Cap, "MC" and Enterprise Value, "EV." Most investors recognize MC, the number of shares outstanding multiplied by the share price. This simple metric serves investors well if there's not much debt on the balance sheet.
In short, market cap ignores debt on the balance sheet
However, if a company employs debt, then more »
According to a new report, "BP's 2013 Statistical Review of World Energy," China consumed just over half of the total coal burned on the planet in 2012. Consumption was up 6.1% for the year:
"The Asia Pacific region, which includes China, India, South Korea, Japan and Australia, accounted for nearly 70% of the world's coal use in 2012. China alone accounted for more than 50% of global more »
According to Wikipedia, Resource Nationalism (RN) is "the tendency of people and governments to assert control over natural resources located on their territory." This definition fails to convey the breadth of the threat the world faces. Most readers recognize overt acts of RN.
At its worst, an act of RN comes without warning, and without compensation for the seized assets. More commonly, a government fails to honor a contract, demands more »
Talk about a fall from grace. Peabody Energy (NYSE: BTU) used to be the bellwether coal name in the U.S. and arguably the world. That was two years ago when the CEO, the de facto spokesperson for the industry, liked to talk about the "Coal Supercycle." At $18 and change, Peabody is very close to an all-time low. The last time the stock price was this low was at more »
On Friday, May 31st, iron ore prices reached a 7-month low of about $111 per metric tonne. With the price now down 30% from its high of $159 in February, what does it mean for mid-tier producers Cliffs Natural Resources (NYSE: CLF) and African Minerals (NASDAQOTH: AMLZF)? What does it mean for the majors Rio Tinto (NYSE: RIO), BHP (NYSE: BHP) and Vale (NYSE: VALE)? Are we approaching a buying more »
Last year, sentiment on First Solar, (NASDAQ: FSLR) and solar stocks in general was awful. In looking at analyst reports from the first half of 2012, there were several with price targets of $12-$18 per share.
Today the stock is at $52, up well over 300% from its 52-week low.
Here are some of the reasons given for the company's anticipated demise....
A natural gas price under $2 more »
U.S. uranium producer Cameco (NYSE: CCJ) has been saying all year that uranium demand will increase at a 3% Compound Annual Growth Rate, or "CAGR," over the next 10 years. Recently, a new report by GlobalData suggested that uranium demand will increase by a 4% CAGR over the next eight years. Either way, with the supply side looking increasingly challenged, uranium prices are likely to go higher.
Last week more »
Both Palladium and Silver Have Industrial Uses
In the past six months, the Palladium spot price is UP 13% while Silver and Gold prices are DOWN 33% and 20%, respectively. Bellwether Gold company Barrick Gold, (NYSE: ABX) and Silver company Silver Wheaton, (NYSE: SLW) are down 46% and 54% from 52-week highs. These companies are suffering greatly from rising costs and resource nationalism in key operating jurisdictions.
Barrick Gold, Trouble more »
Natural Resource Partners, LP (NYSE: NRP) continues to make good progress diversifying away from leasing its owned coal reserves in central Appalachia and the Illinois Basin. And that's a good thing because the Company's coal business has been under significant pressure. The reason for my update on this company is that Natural Resource Partners recently presented at an industry conference. Please see the corporate slide show and listen more »
If First Solar, Why Not Uranium Stocks?
Last year, sentiment on First Solar, (NASDAQ: FSLR) and solar stocks in general was awful. In looking at analyst reports from 1h 2012, there were several with price targets of $12-$18 per share. Today the stock is at $52, up well over 300% from its 52-week low.
Here are some of the reasons given for the Company's anticipated demise....
A natural more »
Few questioned the reasoning behind the thesis. Natural gas prices had been stuck in a range between $2.00-$3.30/mmBtu for almost two years. Yet, today natural gas prices are above $4/mmBtu, more than double last year's low tick. The EIA reports,
"Average wholesale (spot) prices for natural gas fell significantly throughout the U.S. in 2012 compared to 2011. The average price for natural gas more »
Cloud Peak (NYSE: CLD) is a very good coal producer. As a result, its stock has held up far better than U.S. peers, many of which have been slaughtered. Only Alliance Resource Partners, (NASDAQ: ARLP) a coal MLP and Consol Energy, (NYSE: CNX) have performed better. Alliance has benefited most from the rebound in natural gas prices to above $4 per mcf from $2-$3 per mcf last year more »
Is All the Bad News Finally Out on Allied Nevada?
Before I try to answer, let's review the chain of events that has taken the stock about 70% from December 31, 2012 to $9.60 today. For comparison purposes, the Market Vectors Gold Miners ETF, (NYSEMKT: GDX) is down about 40% year-to-date. Allied Nevada, (NYSEMKT: ANV) is one of the worst performers among mid-tier producers. The next worst performer more »
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