Question to Coalporter or someone else on the short side
Is there any scenario when JRCC survives?
I do not have a position, holding its fellow ACI (and very nervous). Thinking of shorting JRCC, but do not understand why it outperforms other coal companies when the situation is getting worse for JRCC.
The way I see it, JRCC has cash till early 2014 (given that they lose 10 mill/month). Thermal coal is not a savior, because even if it rebounds before 2014, it is already contracted and priced (priced for losses). Met coal somewhat in the process of rebounding, but I do not think it will rebound that much before early 2014. Asset sale? This may be the only savior left ...
Anything else that cap pull them out of this mess?
Keep in mind that JRCC and the other coal miners have only contracted a portion of their thermal coal production as they are not mining at their full capacity. If a nasty winter comes around, utilities will get the coal they have contracted for but any excess they will need will be at spot market prices and I am sure the coal miners will ramp up production to take advantage if prices are right.
As someone who goes short on ACI from time to time, I would not recommend going short JRCC. Any positive news will cause it jump wildly. The reason JRCC outperforms the others is because they are a relatively small player and will yield greater returns on a coal rebound than other coal miners. Maybe more gamblers in JRCC but who knows. It is better to make quick trades in JRCC at less than $2 on the long side.
I honestly do not follow JRCC. I do follow BTU, CLD and ACI. Those three have 90-95% of thermal coal contracted through Q1 2014 (if production does not increase, then it is much closer to 100%). I assume that JRCC does exactly the same (correct me if I am wrong).
In this case, they are going continue to lose the same amount of money as now on 90-95% of coal volume. Now if the winter turn out to be cold, they can sell say 10% of coal at higher prices. But prices should be so much higher to make up for losses for 90% of coal. In fact, with current price of $50 for CAPP and their cost which is much higher, additional volume will only cause more losses if they sell coal even for 30% higher price than now.
Could you please explain how the math works with JRCC's thermal coal.
Syrian war will only pump up the oil prices. this may also have impact on coal prices though not often. Now it is starting to look like Obama wants to "pull a Bush" and want go to war without the approval of Congress.