Must-know: An overview of Walter Energy

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Aug. 11 2014, Updated 3:13 p.m. ET

Walter Energy Inc.

Walter Energy Inc. (WLT) markets itself as a “pure-play metallurgical coal producer for the global steel industry.” Of the total 2.9 million tons of coal the company sold in 2Q14, 2.7 million tons—or 92%—was metallurgical coal.

This is in contrast with Cloud Peak Energy (CLD) which derives all of its revenues from selling thermal coal. Other major producers such as Peabody Energy (BTU), Arch Coal (ACI), and Alpha Natural Resources (ANR) derive their revenues by selling mix of both types of coal.

Company operations

The company has mining operations in the U.S., Canada, and the UK. In 2Q14, the U.S. operations fetched the company $299 million, or 79%, of $378 million in revenues. The remaining $79 million was predominantly derived from the UK and Canadian operations.

U.S. operations

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The company’s U.S. operations include underground and surface mines, coke plant and natural gas operations in Alabama, as well as underground and surface mining operations in West Virginia. The company runs three underground mines in Alabama. The mines are called No. 4, No. 7 East, and No. 7 West. The Alabama operations are estimated to have ~176 million tons of reserves in as of December 31, 2013.

The company acquired four mines in two mining properties, Gauley Eagle and Maple, in West Virginia in 2011 through the acquisition of Western Coal in 2011. These mines produce both metallurgical and thermal coal. The mines had 45.6 million tons of reserves as of December 31, 2013.

Canadian and UK operations

The company operates three surface metallurgical coal mines—Wolverine, Brule, and Willow Creek—in Northeast British Columbia, Canada. The mines were estimated to have 137.6 million tons of recoverable reserves as of December 31, 2013. Due to current weakness in the metallurgical coal market, the company has idled its Canadian operations in 2Q14. The company’s UK operations include an underground mine and a surface mine in South Wales with recoverable reserves of 15.5 million tons. To learn more about the state of the U.S. metallurgical coal industry, continue reading the next part of the series.

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