How Arch Coal is dealing with the weak coal market
First and foremost, Arch Coal has been slowly building up its financial health over the past few years. It has been slowly divesting its non-core assets in a strategic move to realign its portfolio for growth and focus more on their most value-enhancing core assets. This was also a move to increase their financial situation and to shield themselves from the weak coal market. According to Arch Coal’s president, its recent sale of Canyon Fuel mine in Utah for $423 million was to help the company’s share price and to strengthen its cash balance sheet.
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The company has increased its total liquidity from $1 billion in 2010 to around $1.5 billion as of 3Q 2013. It must be noted that this amount of liquidity is significantly larger than the company’s market cap. However, the company does also possess a lot of debt, of which none are due until 2016. The vast amount of cash puts Arch Coal in a strategically beneficial position when the coal markets improve as they could potentially invest into infrastructure for their current mines to boost production.