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Coal Review - Volume 5

Brief discussion of where the coal industry is headed since we last reviewed in March.

  • Index of non-bankrupt domestic thermal coal companies has rallied 45% since the start of the year and 75% since the year's earlier lows.
  • US coal production could dip to 784 million tons in 2016, the lowest level since 1983.
  • US Bankruptcy Court for the Eastern District of Virginia approves Alpha Natural Resources' plan for reorganization.

Full Article Available on Seeking Alpha: Coal Review 5: Cyclical is as Cyclical Does

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Coal's Long Sunset

Coal may be down, but it is not out yet, and as long as that is the case, there will be an opportunity for enterprising investors with strong stomachs to find opportunities.

  • Global coal use is still expected to increase through 2040
  • In the US coal is still used produce between 35% and 40% of electricity.
  • Natural gas switching in the US is occurring, but when the price rises above $2.50 mmBtu it becomes more cost effective to burn coal

Please Follow the Link to the Full Article Published on SeekingAlpha: Coal's Long Sunset

Please follow the link to the excel file with supporting charts and data: Coal's Long Sunset Date

 

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AK Steel: 10-Year Low But Still Expensive

At Massif Capital one of the central questions we are always searching for the answer to, is...is the price right, is this asset a good buy at this price.  This article was a review of AK Steel prior to 2015 Q4 results. We were seeking to understand if this steel company, trading at a 10-year low offered significant enough margin of safety for the risk, or phrased differently, was trading at a significant enough discount to its intrinsic value to justify the risk of it not reverting to its mean value.  Our conclusion prior to the release of Q4 2015 results was that it was not.

  • AKS may be currently trading at a ten-year low, but is it cheap enough to be considered a good buy?
  • Despite efforts at improvement of balance sheet are still stretched, exposure to the automotive sector is excessive.
  • Strategic missteps and poor stewardship by management have poorly positioned AKS for the future.

Please Follow the Link to the Full Article Published on SeekingAlpha: AK Steel: 10-Year Low But Still Expensive

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