Headlining today's coal industry news, State figures reveal that West Virginia - one of the nation's top coal producing regions - has added approximately 1,000 more workers than were employed this time last year.
According to an articleposted in the Charleston Daily Mail today:
-- The region's coal industry employs nearly 3,000 more workers than it did in '08;
-- 18,240 surface and underground miners were employed in June '08 vs. 17,520 in June '07; and
-- Surging demand and prices may be driving increased workforce growth going forward.
The piece goes on to note that Massey Energy
(NYSE: MEE) - the #4 coal producer in the U.S. - which places a large operational focus on Kentucky, West Virginia and Virginia and also owns properties right next to our portfolio favorite Quest Minerals & Mining Corp. (OTCBB: QMNM), held a job fair in Boone County (WV) last week.
With the nation's unemployment rate hitting a 5-year high of 6.1% in August, the coal industry appears to be a hotbed for growth going forward.
Commenting on the remarkable growth potential of the coal industry in years to come, West Virginia Coal Association President Bill Raney was recently quoted as saying: "Everyone's confident this market will sustain over the next several years and well into the next 20 years." and "Generally speaking, it's evident that supply and demand has kept the market very strong." "There doesn't seem to be enough coal in the world. That's the benefit of being in an energy-producing state."
Quest Makes Additional Improvements
In other coal-related news, Quest Minerals & Mining Corp. (OTCBB: QMNM) announced this morning that it has taken every measure possible to produce a sustained level high coal volume going forward. The company anticipates updating investors on its mining progress over the next few weeks, a move
that should have a positive impact on the current pps as long as the tonnage reports look promising.
Commenting on the recent infrastructure overhaul at Quest's Pond Creek, KY coal mine, Everett Hampton, President of Whitestar Mining, LLC, commented, ``For the past 10 days, we have refurbished and modified all of the key inner workings essential to our operations. Splitting the beltline to add another head drive; and replacing 1,200 feet of used conveyor belt that was more than ten years old was just one of the major improvements. We also added four feet to the belt feeder along with its own motor so that it will run independent of the beltline and therefore, cause fewer delays. Lastly, we focused on the
machinery by installing new hydraulic jacks to the roof bolter and refurbishing the under carriage on our joy 14-10a miner to give it better output efficiency. Ultimately, we have taken every measure possible to ensure that we will not only produce high coal volume, but to have this mine in the shape needed to sustain consistent production levels.''
More on the Small Cap Coal Sector
America West Resources, Inc. (OTCBB: AWSR) announced a $6.6M dollar supply contract this morning with a major U.S. energy company that could grow by another $4.75M in ‘09 if the company can stay on tract with production goals.
According to today’s release, the contract announced today coupled with a contract announced back in June could result in ap
proximately $32M in revenues for AWSR over the next 16 months if all goes well. For a company that logged just over $6.6M in 2007 revenues, the recent inflow of contracts could transform America West into a viable, lower-tiered domestic coal supplier
Now trading at $.28 with about 110 million shares outstanding, the stock is up approximately 11% on volume of 38,000 as of 1:31 EST today. If the news keeps rolling here, things could get interesting.
As a result of this startling fact, the price of coal continues to skyrocket. This dynamic has translated into stellar earnings for upper-tiered suppliers including Arch Coal (NYSE: ACI) and Peabody Energy (NYSE: BTU) and also a very positive industry outlook for the foreseeable future.
Here's a quick look at some facts on the deficit:
-- The world could face a coal supply deficit of 33 million to 44 million short tons (30-40 metric tons, or tones)
-- India is running a coal deficit, with coal demand last year for the steel and energy industries reaching 452m tones, of which 61m tones had to be imported.
-- By 2015, the country will be consuming about 800m tones of coal but will have to import more than a quarter of this, according to estimates from KPMG.
-- Supply disruptions in Australia - the world's premier coal supplier - led to an $800M dip in monthly coal exports during the month of April.
-- Arch Coal management forecasts coal demand to eclipse supply by 25 million to 35 million metric tones, and expects this supply deficit to grow through 2010.
-- Coal accounts for about 69% of total US energy demand.
-- The World Coal Institute expects energy consumption to rise by 8% to 10% per year through 2020.
-- In a recently issued research note, Citigroup stated that prices for met coal could reach $330 - $350 per ton by 2010.
In our opinion, the ongoing coal deficit is extremely positive for proven suppliers ranging from upper-tiered players like Arch Coal to emerging producers including Quest Minerals and Mining (OTCBB: QMNM). Tune into Quest's investor call on Tuesday to learn more about how the company is now capitalizing on a very positive business environment.
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.
More Efficient Mine a Huge Bonus For Investors since management has stated thus far that the Cedar Grove mine:
(1) Requires far less time and expenditure to bring into production than Pond Creek;
(2) Holds as much coal: between 1,000 and 2,000 raw tons/day and
(3) Houses higher quality coal than what is currently being mined at Pond Creek;
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.
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.
$2M Chapter 11 FilingShouldn'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.
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.
Quest Minerals and Mining Corp. (OTCBB: QMNM) finally gave investors what they were looking for today. The company announced that after a rough five month rehabilitation process, its Pond Creek Kentucky mine is now producing coal.
With coal recently fetching as much as $201 in some regions of the world, if QMNM can stay on track with plans to produce between 1,500 and 2,000 raw tons per day from its first mine, the company will make some very very happy investors going forward. Not that it hasn't already.
The NanoCap Sucess Story of the Decade?
For those of you that have been hiding under a rock for the past month, in one of 2008's biggest nano-cap runs, QMNM recently gained more than 4,000%, moving from $.0016 (6/19) to a high of $.075 (6/23) before settling back into the $.02 - $.03 range while the market anxiously awaited news of production.
Shares Surge 100% in One Hour
Subsequent to the news today, shares surged up over 100% to an intra-day high of $.048 and ended the day at $.0339, up 42% on volume of 133,921,767. What I found most encouraging about today's action is the fact that the production announcement was issued with just over 1.5 hours left in the trading session and the stock had traded relatively flat on about 20 million shares or so prior to the big news.
Now that the day traders, flippers, and scaredy cats all had the chance to take some profits off the table, I think that we could be off to the races tomorrow. The stock simply behaved too beautifully prior to production and has attracted too many eyeballs over the past few weeks not to.
Moreover, the company also announced today that it is working diligently to bring a second mine into full production mode very soon which will produce just as much coal as the Pond Creek location. Now boasting the potential of 3,000 - 4,000 raw tons of coal per day, QMNM provides investors with both the piece of mind of knowing that they are 100% capable of bringing a mine into production mode as well as the prospect of yet another, equally productive mine coming online very soon.
As the image above shows, Coal prices have proven to be both lower and more stable than that of oil and gas historically. According to the World Coal Institute, "Coal provides 25% of global primary energy needs and generates 40% of the world's electricity". The institute also states that: "At current production levels, proven coal reserves are estimated to last 147 years. In contrast, proven oil and gas reserves are equivalent to around 41 and 63 years at current production levels respectively".
Despite the obvious negative environmental impact of burning coal, the natural resource will be in high demand for the foreseeable future. This facilitates a very favorable operating environment for Quest going forward as the company moves into production and begins fulfilling orders including previously announced $8M deal with Logan & Kanawha Coal Company, LLC.
Quest Minerals and Mining has provided some much needed profits for investors willing to gain an ownership position at a fraction of a penny in tough economic times. With both contracts and coal in hand, the future looks very bright indeed.
Commenting on the big news today, Quest President Eugene J. Chiaramonte, Jr., stated "I am ecstatic to announce that after a lengthy five month rehabilitation process, we have begun mining coal at our Pond Creek location. Despite a number of delays and setbacks experienced in bringing the property online into the coal production stage, we feel that production could not have come at a better time given the recent surge in global coal prices."
After weeks of waiting, Quest is now producing coal and the market is fully aware. In my opinion, Wednesday's pullback could have created a very nice entry point for those confident that another run-up is imminent. Do your due diligence and weigh risks against the rewards. If you have not educated yourself on the Pond Creek potential, this would be the time to do so.
With global energy consumption expected to grow by nearly 60% between 2004 and 2030, the need to both expand infrastructure and prospect more fuel sources is reaching paramount heights.
Two of our portfolio companies in the news today are positioning themselves to capitalize on the world's thirst for energy. Both out with announcements this morning that mark the dawn of a new day for each respective business.
Marmion Up's The Ante!
Marmion Industries Corp (OTCBB: MMIO) has just recently broken ground on a new state-of-the art facility which is expected to help the company meet rising demand for its products and also significantly improve efficiencies in a number of other key areas.
MMIO's recent growth and future prospects have created the need for the acquisition of 2.75 acres of property in order to build a brand spanking new 31,500 square foot manufacturing facility. The new Marmion compound will increase the company's production capabilities while acting as their international sales office and overall home base.
Quest Inks A Winner!
In other energy news, Quest Minerals and Mining Corp. (OTCBB: QMNM) announced a $8M purchase order today that has massive implications on the company's future. They did log less than $100K in revs last year, so this deal, if booked, is surely QMNM's crowing achievement to date.
The purchase agreement with Logan & Kanawha Coal Company, LLC specifies that the company - which by its own account has been serving the coal industry for over 80 years and has sold over 250,000,000 tons of coal in that time - will order as much as $8M worth of coal from Quest between now and December.
This would equate to revenues per share of about $.025. Thats almost 7 times its current trading price!
Cashing In On An Essential Commodity
As the image above shows, Coal prices have proven to be both lower and more stable than that of oil and gas historically. According to the World Coal Institute, "Coal provides 25% of global primary energy needs and generates 40% of the world's electricity". The institute also states that: "At current production levels, proven coal reserves are estimated to last 147 years. In contrast, proven oil and gas reserves are equivalent to around 41 and 63 years at current production levels respectively".
Despite the obvious negative environmental impact of burning coal, the natural resource will be in high demand for the foreseeable future. This facilities a very favorable operating environment for Quest going forward if the company can begin prospecting coal and shipping to fulfill orders such as the one announced today.
So there you have it , two micro-cap market prospects for Tuesday morning, MMIO and QMNM.
Quest Pushes Forward, Moves Back Towards Production
Quest Minerals & Mining Corp. (OTCBB: QMNM) hit the presses with some rather positive news this morning.
The company announced that it has retained White Star Mining, LLC, of Kentucky, to conduct mining operations at their Pond Creek Mine at Slater’s Branch, Kentucky. According to the release, White Star has cumulatively amassed more than 50 years of mining experience and has already commenced preparations at the site. Limited operations are expected to begin next week.
Commenting on Today's news, Eugene Chiaramonte, Jr., President of Quest, stated, “We are very excited that White Star has agreed to conduct mining operations at the Pond Creek Mine. They have significant experience in the coal mining industry and have an excellent reputation for providing quality work. We are looking forward to having them as part of our team and we look forward to a prosperous relationship.”
If this relationship comes to fruition and production gets online here, current levels could prove to be quite laughable.
It is a new year and that time again to get back on the horse, lay out a plan and forge ahead with tenacity that hopefully lasts until March. By then, the gyms will be empty again, sales of the great classics of literature will decline and people's incentive to improve their lives by organizing the garage will peter away just in time for spring carelessness.
At least there is a system in place for this regenerative process that ebbs and flows annually. Among a high percentage of Americans is a common resolution. . . INCREASE MY INCOME!
So while some contemplate taking on a second job and others muster up the courage to ask for a well- deserved - or undeserved - raise, active investors know that using your dollars in the market can determine whether you retire at 40 or retire at all.
So with the New Year, let's look at the market with fresh eyes and scour the ticker for a good kick off into 2008!
Put Your Money Where The Money Is
First on the blackboard this morning is an industry that no one can claim is lagging. As global demand for coal skyrockets to unprecedented levels, the search for capable domestic suppliers is on. And with many analysts stating firmly that the stocks of many leading US players have reached their peaks, now may be a great time to weigh the pros and cons of investing in emerging, domestic coal plays.
Quest - A Growing Coal Company
A new name and speculative idea in the coal sector - Quest Minerals & Mining Corp. (OTCBB: QMNM). Based in Kentucky - a top 3 coal producing state - QMNM owns and pursues coal-related properties in the Southeast region of the country. Quest is in the news today regarding their intent on a joint venture with Powell Branch Energy coal properties in southern Kentucky.
According to today's release the project would encompass 1,400,000 tons of proven coal reserves. By today's account, that would equate to more than $70,000,000. For a company trading at under a penny, with minimal historical revenues, the implications of such a deal are enormous.
Who Will Profit From the Upcoming Coal Rush?
Coming out of what one analyst referred to as "one of the most prolific periods ever in the coal industry" during 2007, many investors are chomping at the bit to get in on the action in '08. But not so fast, despite surging international demand, some questions remain regarding who will profit most from the world's growing hunger for coal.
As mentioned previously, on Wednesday, Merrill analyst David Lipschitz cut shares of Peabody Energy Corp. and Consol Energy Inc. to "Neutral" from "Buy," due to the belief that the stocks are trading close to their peaks. So, while the coal company's themselves may cash in on their reserves during 2008, it may prove quite tricky for investors to find a good entry point and make a few bucks on their success.
Just the Tip of the Coal Iceberg
On the other hand, a smaller regional player like QMNM with an opportunity for 30,000 tons of coal per month from just one venture at its door step could, in theory, have a long way to go before it hits a peak from a market perspective.
With oil and natural gas reserves being depleted at a record rate and costs associated with both natural resources hitting new highs - seemingly by the day - coal is increasingly relied upon and will continue to be, at least over the near term, to fuel our lives. This holds especially true in regions outside of the U.S.
Emphasizing this fact, Calyon Securities analyst Gordon Howald recently stated that China and India represented 20 percent of total global coal consumption in 1980, and are expected to account for 60 percent by 2030. He also predicts that rising international demand will ultimately result in a shortfall of US supplies of steam coal and a subsequent surge in prices.
This could all be extremely positive for Quest Minerals & Mining Corp. (OTCBB: QMNM) if they are indeed able to make good on their recent letter of intent and continue on with plans to aggressively pursue opportunities with proven coal bearing projects.
So while people around you are looking for the next get rich quick scheme or trying to win the lottery, we sincerely hope that this year you lay the foundation for a future that does not lose steam in spring but that builds your portfolio, your experience and your retirement fund!
The International Energy Agency’s latest World Energy Outlook reveals that coal’s share in global commercial energy is forecast to rise from 25 per cent to 28 per cent between 2005 and 2030, because of its role in power generation. China and India already account for 45 per cent of world coal use and drive over four-fifths of the increase under the “reference scenario”.
The world need energy and despite its reputation as not being the greenest fuel, coal remains an essential energy source across the globe. In fact, German utility company RWE recently forecasted that world energy trade could grow 25% by 2010 if surging Asian demand continues. With world demand ramping up and oil prices skyrocketing, the need for capable domestic suppliers has never be so large. Invest In Your Energy Wisely
Now, we are always on the lookout for an alternative energy company with the makings of an industry changer but the fact is, coal still dominates the energy industry and will continue to for a good many years. Any investor worth his salt cannot ignore the fact that oil companies are some of the bigger moneymakers in a trader's portfolio. So while we continue to put our faith in the fact that alternative energy is on its way up, we definitely want to trade the major players on the way.
Disclaimer aside, one speculative domestic coal play that we've stumbled upon recently is Quest Minerals & Mining Corp. (OTCBB: QMMC). Based in Kentucky, QMMC owns and pursues coal-related properties in the Southeast region of the country. The company has just recently initiated mining operations. Hence the .0028 share price.
Hot Off The Presses
Operating on proven coal reserves, QMMC issued an operational update today, showing investors just how much progress is being made on behalf of the company. Since these guys are an early- stage venture, there's not a whole heck of a lot of information on them out there. For this reason, we'll give you a brief recap on their recent progress:
According to today's press release, QMMC has recently:
- Secured a significant price increase for the sale of coal to a key customer. The price remains undisclosed for competitive reasons; - Negotiated lower trucking costs through increased production volume; - Completed the first major conveyor belt at its Pond Creek Mine that will improve shipping efficiency; and - Made progress in regards to re-opening another two new mines.
Commenting on the company's progress Eugene Chiaramonte, Jr., President of Quest, stated, "We are pleased to report that we have improved our pricing while reducing our trucking costs in this initial start-up phase of our mining operations. We are also pleased that, due to a reduction in work stoppages resulting from required equipment maintenance; we are mining more regularly, resulting in deeper penetration into the mine. As we continue to transition into full operations, we anticipate that our operating efficiency will improve."
With oil hitting new highs - seemingly by the day - and the majority of alternative energy sources not yet ready for widespread use, coal is increasingly relied upon and will continue to be, at least over the near term, to fuel our lives. So, while we are all cheering on the companies that will change the way the world uses its resources, don't forget that traditional energy is still one of the most lucrative industries in the world and definitely an industry worth investing in.
