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Walter Energy, Inc. Common Stoc Message Board

  • blackboxfund blackboxfund Sep 8, 2013 8:06 AM Flag

    More background on Met pricing and the finite nature of high quality metallurgical coal deposits

    Dalian Commodity Exchange (DCE) data, coking coal futures for Dec and March have moved above mid-May levels and are up ~20% off the July lows.


    Annual HCC demand is forecast to rise from a 2012 level of 150 million tonnes ("Mt") to 230Mt in 2030.

    Currently the metallurgical market as a whole is seeing a slight oversupply, but additional mines need to come online by 2022 to address expected future supply shortfalls.

    Quarterly pricing for HCC has dipped below marginal production cost, reaching the 90th percentile on the global cost curve, and prices are expected to bottom during Q3 2013.

    An average price (2012 dollars) of $180/t is expected in the period 2014 to 2020. This is in line with Cardero's assumed baseline prices used in the Company's 2012 Prefeasibility Study.

    In Wood Mackenzie's analysis, pricing is forecast to increase through the proposed production period. Prices beyond 2020 are expected to respond to higher production costs and will reach $225/t by 2030 (2012 dollars).

    Future trends in export metallurgical coal quality will be influenced by the finite nature of high quality metallurgical coal deposits. In the coming years, exported metallurgical coal quality will likely increase in ash content (up to an estimated 10% to 12%), resulting in lower quality products, particularly with respect to key FSI and CSR. The most notable feature of the Carbon Creek coals is a low ash, with HCC washing to 4.0% to 6.0% ash content.

    Sentiment: Strong Buy

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