Alpha Natural Resources
Alpha Natural Resources, Inc. (ANR) is the biggest met coal producer and exporter in the U.S. The company is the third-biggest met coal producer and exporter in the world behind Australian producers including BHP Billiton Limited (BHP).
Apart from met coal, Alpha Natural Resources produces thermal coal from its mines in the Appalachians and the Powder River Basin. With revenues of $5 billion in FY13, it is the second-biggest American coal producer (KOL) behind Peabody Energy Corporation (BTU).
The company’s operations are roughly divided into three segments:
- Metallurgical coal
- Eastern steam coal
- Western steam coal
Eastern steam coal and metallurgical coal are produced from the company’s mines in the Appalachians. The company had 86 operational mines—60 underground, 26 surface—in the Appalachians as of March 31, 2014.
Western steam coal refers to steam coal produced from the company’s two mines in the Powder River Basin. You can read more about the regional economics of coal Market Realist’s series, Must-know: US coal regions and producers with the best prospects. Apart from coal, the company also produces and markets other commodities, and provides other services.
Revenues and product mix
Out of its total $1.05 billion revenues in 2Q2014, the company derived $532 million, or 49.5%, from steam coal, $388 million, or 36.1%, from metallurgical coal, and the remainder from other products and services.
The company sold 4.5 million tons, or 22.5% of total tonnage, of met coal in 2Q2014. The price of met coal is generally higher than steam coal. So, while met coal accounted for just 22.5% of tonnage, it produced 36.1% of revenues.
While met coal prices are higher, the cost of extraction is also higher. With met coal prices at a multi-year low, the company, along with other met coal producers such as Walter Energy, Inc. (WLT), has not been able to recover costs. This has lead to production cuts and idled mines. The mounting losses have dented Alpha Natural Resource’s balance sheet. In the next part of this series, we’ll look at the company’s balance sheet.