On the heels of an anxiously awaited coal production announcement last Thursday, Quest Minerals and Mining Corp. (OTCBB: QMNM) stated plans late Friday night to soon bring a second, more lucrative mine online in the very near future. 

Since hitting a recent high of $.075 on 6/23, shares have depreciated about 2/3, closing last week at .0247.After two consecutive red finishes subsequent to Quest's biggest corporate announcement to date, the stock could benefit greatly this week from Friday's unexpected news, which arguably makes the company twice as valuable now.

Whitestar Gives Cedar Grove Thumbs Up According to the release, Quest's contract miner Whitestar Mining LLC is already taking the initial steps necessary to initiate coal production at the company's Cedar Grove location. On a very positive note, the second mine is expected to require far less rehab than Pond Creek, which took about 5 months to bring online. Also, Cedar Grove is expected to house higher quality coal than Quest's first mine. Judging by the wild movement in the stock prior to mine #1 being brought into production stage, I wouldn't be too surprised to see a similar increase in investor interest here as Cedar Grove begins rehab.

Friday's development adds a whole new positive element to the deal for investors. In my opinion, the advances made by the stock over the past few weeks were made strictly on the potential of the Pond Creek property. A second mine is surely icing on the cake. If Quest can bring both Pond Creek and Cedar Grove online within the next few months and begin producing about 3,000 raw tons per day between the two properties - right in the middle of their current forecast - at $100 per ton, the company would be generating $300,000 per day or $2,100,000 per week.

Even if it cost the company $50 to produce each ton, that still leaves more than $1 million per week in profits. Erring on the side of conservatism, if Quest only produced 2,000 tons per week between the two mines and it cost the company $80 to produce each ton, at a price of $100 per ton, QMNM would still turn a profit of $14.6M after one complete year of full production. It is quite clear; the company's potential for significant future profitability is high as long as it can stay on track with production goals and bring the Cedar Grove property online as easily as expected.

Did you know?

25% of the world's energy is derived from coal;

50% of U.S. electricity is coal-powered;

92% of coal is used to make electricity; and

72% of the world's steel production is coal-based.

In other coal industry news:

(1) In a recently issued research note, Citigroup stated that prices for met coal could reach between $330 - $350 per ton by 2010;

(2) Benchmark spot prices for top-grade 5,800 kcal/kg at Qinhuangdao, China's top coal shipping port, recently hit $144.40-145.90 a ton -- more than doubling from a year ago; and

(3) The thermal coal price at Australia's Newcastle hovered near record levels at about $195 a ton over the past week.

This facilitates a very favorable operating environment for Quest as the company pushes its second mine into production mode.

"The Dirt on Coal" 

$2M Chapter 11 Filing Shouldn't Be a Biggie One major question that we have heard from investors time and time again relates to QMNM's past chapter 11 filing. 

From the filing. "On August 3, 2007, the Bankruptcy Court approved Gwenco's request for debtor-in-possession financing in an amount of up to $2,000,000. In February 2008, Gwenco submitted a preliminary plan of reorganization to the court for approval.” I will follow up with management here. But from what I gather, once Quest pays back the $2,000,000, the situation is settled. They surely aren't the first or the last company to file for Chapter 11. Moreover, most filing for chapter 11 don't currently lay claim to more than 12 million tons of an asset valued at more than $100 per ton in some regions of the world.

Gwenco, Inc. Chapter 11 Reorganization. 

QMNM recently gained more than 4,000%, moving from $.0016 (6/19) to a high of $.075 (6/23). With share price now settled back down below $.025 and news that a second, more profitable mine will be coming into production soon hitting the market, expect all eyes are on Quest again on Monday.