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Arch Coal Inc. Message Board

  • cadmium_telluride cadmium_telluride Mar 1, 2013 11:59 AM Flag

    Here is the Real Value of ACI

    In 2012, ACI reported coal sales revenue of $4.2B on sales of 141M tons of coal, and a adjusted net loss of $77M. ACI has 212M shares outstanding. Let's look at the numbers:

    The adjusted net loss was only $77M/$4.2B = 1.833% of sales revenue. That means the coal price only needs to go up 1.87% from its average 2012 level, for ACI to break even. You think there is no possibility that coal price can go up just a little bit, just 1.87%?

    The per ton coal revenue was $29.79/ton (short tons) Think about how DIRT CHEAP American coal is, compare with international prices. China's domestic coal, which is inferior in quality than American coal, sells for 750 yuan per metric ton, which is $121 per metric ton, or $132.8 per short ton.

    So Chinese coal is more than $100/ton more expensive than what ACI fetched on its 2012 coal sales. ACI lost $0.55 on each ton of coal it sold. But ACI can sell the coal to China for $100/ton more. After you take away the transportation and everything, ACI can still easily fetch $50/ton profit.

    $50/ton profit at 141M tons of coal is going to be $7B profit for ACI each year. SEVEN TIMES ACI's current market capital. $7B profit per year is $33 profit per share per year. That easily justify ACI share price at $330 per share, versis current $5.15.

    Any way you slice it, ACI is ridiculously way under-valued here. Buy as many shares as you can. Here is a huge profit to be made here.

    And yes China's coal import in 2012 expanded to 290M tons versus 182M tons in 2011. China's coal import can only accelerate faster, as China faces a severe water crisis and they MUST cut domestic coal mining.

    Sentiment: Strong Buy

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