Alpha Natural Resources Inc.
) announced the recommencement of longwall operations at its
Cumberland underground mine in Greene County, Pa. The mine owned
by the company's business wing, Cumberland Coal Resources LP, was
temporarily shut down since Jul 15, 2013.
Alpha Natural Resources worked at a brisk pace to mitigate the
adverse geological conditions and managed to bring the mine back
into operations. With the resumption of operations, the company
is now focused on increasing production levels while
simultaneously keeping a tab on the geological status as well as
The almost one month of production lag will hit the company's
shipment in the third quarters and will also lead to cost
pressure. The Cumberland mine is one of the highest contributors
to Alpha Natural Resources' margins. The shutdown could not have
come at a worst time especially with a challenged U.S. coal
However, the company has been braving the headwinds with its
cost saving measures, production cutbacks and capital restraints.
We believe these steps will prove to be critical for Alpha
Natural Resources to fight against the U.S. coal downturn in the
Furthermore, the company must brace itself to face the tough
market dynamics with natural gas prices declining with rising
inventory. The World Bank's latest announcement of reducing coal
project funding in developing nations might result in thermal
coal oversupply, which would affect prices.
Despite these limitations, the coal market is expected to
rebound in the long term with signs of growth projected after
2016. In addition, the nearly 3% rise in steel demand in 2013 and
2014 will help spur the company's metallurgical coal operations.
At the moment, Alpha Natural Resources has a Zacks Rank #3
Other coal operators, however, looking good in the market are
Zacks Ranked #1 (Strong Buy)
Alliance Holdings GP, L.P.
Alliance Resource Partners L.P.
Oxford Resource Partners, L.P.
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