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Atlantic Coal: Mining 4Q 2012 Production Figures: Excellent

Contributed by Fox-Davies Capital

Atlantic Coal has announced its production figures for the fourth quarter of 2012. A total of 66,989t of run-of-mine coal were mined, which yielded 47,514t of clean anthracite. Sales totalled 53,677t of coal and 948.16y3 of overburden was removed. The net result was that 2012 was a record year for Atlantic Coal at its Stockton anthracite mine. In total, 417,839t of run-of-mine coal were mined and total overburden mined came to 3,728,597 bank cubic yards. This resulted in clean coal production of 161,529t and anthracite sales of 140,213t. The average price received for the year was US$149.20/t.

This was another good quarter for Atlantic Coal. Overburden mined, clean coal produced, coal sold and coal prices were all higher than in 2011. Whilst the stripping ratio, expressed as the ratio of overburden removed for a ton of clean coal produced dropped to 23.1 from 32.5 in 2011, it did not quite drop to the forecast level of 17.7. This drop in the stripping ratio was due to the moving of the Norfolk and Southern Railway line. This facilitated access to over one million tonnes of coal and will allow for more efficient working of the remaining reserves of the mine.

Atlantic Coal ended 2012 with stocks of 23,3711 of clean coal. This figure was much higher than the 1,484t at the end of 2011, despite the higher sales figures. During 2012, the sales channels were expanded with the first major export shipment outside of North America, comprising 11,000 tons of anthracite from Fairless Hills Port, Philadelphia to Germany for use in the steel industry. We are positive about further such sales in the future.

There is however one area of concern. Although sales prices rose year on year from US$142.33/t in 2011 to US$149.20/t in 2012, this masks the fact that prices were significantly higher in the first half of the year. In the first half they averaged US$134.4/t in the final quarter following 148.5US$/t in the third quarter. We believe that this reflects the fact that coal prices in North America have been weak following the build-up in supplies of natural gas from fracking.