Alpha Natural Resources: An in-depth analysis (Part 2 of 9)
Coal assets in the mining basins
As one of the leading coal producers in the U.S., Alpha (ANR) has a huge presence in various coal mining basins across the nation. Its operations can be attributed between the Eastern and Western segments. Alpha sold a total of 86.9 million tons of coal in 2013, of which 86 million tons were produced and process by the company. Many global coal producers (KOL) also operate out of these mining basins in the U.S. Some examples of the major players in the area are Arch Coal (ACI), Peabody Energy (BTU), and Consol Energy (CNX).
The general rule is that underground mines typically cost more to mine, which is why Alpha spends more per ton of coal sold in the Eastern coal segment where they mostly have underground coal assets.
Within the Eastern segment, Alpha has presence in both the Central and Northern Appalachia mining basins. Its coal reserves can further be classified into assigned and unassigned reserves. Assigned reserves are planned on being mined in a mine that is either in operation, idle, or with plans to be mined. Unassigned reserves might or might not be mined in the future, with no immediate plans on being mined. It must be noted that unassigned coal reserves require significant amounts of capital spending to bring them online for production.
Within the Northern Appalachia region, Alpha operates out of its Cumberland and Emerald underground mining complexes, as well as five other underground mines, nine surface mines, and two coal preparation plants.
- In this area, as of 31 December 2013, Alpha controls 902 million tons of coal, of which only 148.9 million tons are assigned and are currently active whereas the other 753.1 million tons are unassigned.
- It mainly sells high Btu, low, medium, and high sulfur coal to both eastern utilities and steel companies.
- In 2013, the Cumberland mining complex shipped 5.6 million tons and the Emerald mining complex shipped a total of 3.8 million tons of coal. Approximately 18% of the total shipments out of the Northern Appalachia region were marketed as high volatility metallurgical coal to their customers.
In the Central Appalachia region, Alpha operates out a staggering 50 underground mines, 13 surface mines, and 21 coal preparation plants.
- In total, as of 31 December 2013, Alpha controls over 2,647.7 million tons of coal throughout their operations in the Central Appalachian region. Of this coal reserves, only around 1,234 million tons of coal are currently active and assigned whereas the other 1,413.7 million tons are unassigned.
- It mainly sells high Btu, low, medium, and high sulfur steam coal to eastern utilities and metallurgical coal to steel companies.
- In all, Alpha’s operations out of this area shipped a total of 36.6 million tons of coal.
Alpha’s operations in the Western segment are in the Powder River Basin from where its operates out of only two surface mines, in both the Belle Ayr and Eagle Butte mining complexes, shipping a total of 38.2 million tons of coal in 2013.
- In total, Alpha controls around 737.1 million tons of coal in the region, with all mines currently assigned and active.
- It mainly sells sub-bituminous coal which has a lower Btu as compared to bituminous coal that the Eastern segment mines. The low sulfur steam coal is sold primarily to utility companies.
- In 2013, the company’s operations in the Belle Ayr complex shipped 18.3 million tons of coal, and its Eagle Butte complex shipped 19.9 million tons of coal.
Browse this series on Market Realist:
- Part 1 - A must-know investor’s guide to Alpha Natural Resources
- Part 3 - Alpha Natural Resources: Revenue generation and other advantages
- Part 4 - Alpha Natural Resources: Locating the company’s customers
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