Walter Energy Inc.
) announced that it will curb production activities at its Willow
Creek Coal Mine situated in Northeast British Columbia on account
of the weak metallurgical coal price in the U.S. energy
The purpose behind the production curtailment was to ensure
that optimal economic returns are generated from mining the
high-quality metallurgical coal reserves from the site.
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The mine produces metallurgical coal with a production mix of one
third hard coking coal and two thirds low-volatile PCI coal and
has a life-span of 20 years.
This is the fifth consecutive mine to witness operational
restriction as part of the company's operational management of
low-return assets. In addition to Willow Creek the company has
earlier idled operations at the Aberpergwm mine in South Wales as
well as the Gauley Eagle underground and surface mines in West
Virginia. The Maple underground mine in West Virginia also
experienced production cuts.
A few weeks ago, Walter Energy announced the closure of its North
River underground mine in Alabama. The cutback in Willow Creek
operation is expected to be effective from April this year. It
will continue to work on a limited scale to support the company's
Walter Energy however stated it would restore normal production
levels at the Willow Creek mine once the pricing environment
The mine recorded 19.0 million metric tons of recoverable coal
reserves as of Dec 31, 2012. The company estimates to register a
$7.5 million one-time cash charge related to severance costs
associated with the reduced output at the mine in its forthcoming
Walter Energy further anticipates 2013 metallurgical coal
production to be even with 2012 levels. We believe rising coal
usage in India and China will boost exports thereby contributing
to a favorable near-term top line.
However, the string of production cutbacks or plant idling and
the sluggish thermal coal market might act as headwinds to the
company's operation. Walter Energy at present carries a Zacks
Rank #3 (Hold).
Other stocks performing better and worth a look include Zacks
Ranked #2 (Buy)
Atmos Energy Corporation
CMS Energy Corp.
Based in Birmingham, Ala., Walter Energy produces and exports
metallurgical coal for the steel industry. It also produces
thermal and industrial coal, anthracite, metallurgical coke, coal
bed methane gas and other related products.