Coal’s Remarkable Rebound: A 2024 Investment Opportunity

Contrary to predictions of its demise, the U.S. coal industry has defied expectations, registering a remarkable 40% collective gain in stock value since the beginning of 2023. The resurgence can be attributed to several key factors.

Metallurgical Coal: A Cornerstone of Resurgence

Metallurgical, or coking, coal has played a pivotal role in this unexpected turnaround. Integral to blast-furnace steel production, U.S.-sourced coal, sourced from Appalachian mines, commands a substantial premium over thermal coal, positioning it as an indispensable component in the steelmaking process.

Resilience and Adaptability

The industry’s recent performance reflects resilience and adaptability. Emerging from a period of bankruptcies, coal stocks rebounded, with a renewed focus on metallurgical coal. As governments prioritize carbon emissions reduction and the energy sector grapples with the aftermath of the fracking boom, coal has strategically repositioned itself. Global Dynamics and Fresh Demand

Global dynamics are also fueling demand, with ongoing tensions between Russia and Ukraine creating fresh demand in European coal-importing countries. This, in turn, projects an uptick in U.S. coal exports in 2024.

Bridging the Gap: Coal Production vs. Consumption

While clean energy gains momentum, the persistent gap between coal production and consumption challenges conventional forecasts.

Exploring Promising Coal Stocks

With these dynamics in mind, investors may want to explore the details of a few coal stocks that stand out in the current market landscape.

Benjamin Hill Mining Corp. (CSE: BNN) (OTCQB: BNNHF)

Benjamin Hill Mining Corp. (CSE: BNN) (OTCQB: BNNHF): Prospecting for Success Benjamin Hill Mining Corp. has been making significant strides in its exploration endeavors, focusing on key projects that hold promising potential in the resource sector. At the forefront is the Alotta project situated in the Canadian Yukon Territory, where the company recently embarked on a diamond drilling program.

This initiative, initiated on November 8, 2023, marked a pivotal moment for Benjamin Hill Mining Corp. The program strategically targeted the central area of a substantial chargeability anomaly spanning over 2.0 kilometers at the Alotta project in the West-Central Yukon. The decision to test this anomaly was informed by intricate IP data, aligning with anomalous copper and gold in soil, and compelling geophysical anomalies. Managed by the experienced Archer Cathro and Associates, the drilling program delved into areas meticulously defined for drill testing. What unfolded were revelations of a large, multiphase porphyry system at the south-central portion of the induced polarization chargeability high. The core samples exhibited mineralization rich in pyrrhotite, pyrite, chalcopyrite, and molybdenite, providing tangible evidence of the project’s substantial resource potential.

This drilling success set the stage for Benjamin Hill Mining Corp.’s strategic move on November 15, 2023, as it entered into a non-binding letter of intent with Aion Mining Corp. The proposed transaction outlined the acquisition of a 20% interest in Aion and its fully permitted coal project located in Santander, Colombia. This bold step was a testament to the company’s strategic vision, seeking to diversify its portfolio and capitalize on opportunities within the coal industry.

Fast forward to January 18, 2024, and Benjamin Hill Mining Corp. provided a compelling project update on its 20% interest in Aion Mining Corp. The FLG-111 Concession, housing eight known seams of metallurgical and thermal coal, emerged as a key asset. Notably, the company showcased its commitment to infrastructure development, securing 24 hectares of land, mobilizing large equipment, and obtaining crucial permits for coal extraction. This strategic investment in Aion Mining Corp. is positioning Benjamin Hill Mining Corp. as a key player in the evolving global energy resource market. With a diverse and experienced team, ongoing exploration advancements, and a keen eye on revenue generation, the company is navigating the complexities of the resource sector with foresight and determination.

In summary, Benjamin Hill Mining Corp.’s recent achievements underscore a proactive approach to exploration, strategic partnerships, and resource development. The company’s foray into the coal sector reflects a nuanced strategy, combining successful drilling programs with strategic acquisitions, laying a foundation for sustained growth and value creation for its shareholders.

Alpha Metallurgical Resources, Inc. (NYSE: AMR)

Alpha Metallurgical Resources, Inc. (NYSE: AMR): Powering Steel Production Alpha Metallurgical Resources, Inc. is a Tennessee-based mining company with extensive operations in Virginia and West Virginia. As one of the largest coal stocks globally, Alpha Metallurgical Resources is distinguished by its high-quality reserves, substantial port capacity, and diverse customer base. Specializing in supplying metallurgical products to the steel industry, the company plays a crucial role in the steel manufacturing supply chain. In the third quarter ending September 30, 2023, Alpha Metallurgical Resources reported robust financial results, achieving a net income of $93.8 million, equivalent to $6.65 per diluted share. The company’s financial strength is further underscored by an impressive adjusted EBITDA of $153.9 million for the quarter last year.

Demonstrating a commitment to enhancing shareholder value, Alpha Metallurgical Resources has actively pursued a buyback program. As of October 27, 2023, nearly $940 million has been returned to shareholders since the program’s inception. In a strategic move, the company announced a $300 million increase in the authorization for the share repurchase program, bringing the total authorization to $1.5 billion.

Alpha Metallurgical Resources declared a quarterly dividend of $0.50 per share, with the intention to cease the dividend program after this distribution. The company’s financial prudence is demonstrated by a debt-to-equity ratio of 1%, showing a sound approach to managing financial leverage.

In terms of operational strategy, Alpha Metallurgical Resources completed the refinancing of its Asset-Based Revolving Credit Facility (ABL) and achieved a significant milestone by closing its last remaining thermal mine, Slabcamp. This transition positions Alpha Metallurgical Resources as a pure-play metallurgical producer. Looking ahead, the company issued operational guidance for 2024, providing insights into its strategic direction and expectations for the upcoming year.

Warrior Met Coal, Inc. (NYSE: HCC)

Warrior Met Coal, Inc. (NYSE: HCC): Fueling Global Steel Production Warrior Met Coal, Inc. is a U.S.-based supplier dedicated to mining non-thermal metallurgical coal used in steel production globally. Operating in Alabama, Warrior is a large-scale, low-cost producer and exporter of premium hard-coking coal (HCC). The Blue Creek coal seam it mines has low sulfur, strong coking properties, and is comparable in quality to premium HCC produced in Australia.

In the third quarter of 2023, Warrior reported net income of $85.4 million, or $1.64 per diluted share, with adjusted net income per share at $1.85. Adjusted EBITDA for the quarter was $145.8 million. Sales volumes rose 51% to 2.3 million short tons, driven by strong demand from global steelmaking customers, particularly in Asia. The company successfully reduced debt leverage by nearly 50%, or $146.1 million. Financial highlights for Q3 2023 include total revenues of $423.5 million, a 26% decrease in the average net selling price to $184.71 per short ton, and a cost of sales of $260.4 million. Warrior’s cash flow from operating activities was $138.6 million, with free cash flow of $26.2 million.

As of September 30, 2023, Warrior’s total liquidity was $810.1 million, comprising cash and cash equivalents of $686.8 million and available liquidity under its credit agreement of $123.3 million. The company also executed tender offers for senior secured notes, reducing leverage and enhancing its debt-to-equity ratio. Warrior Met Coal continues to focus on its capital allocation policy, declaring a regular quarterly cash dividend of $0.07 per share on October 24, 2023. The company plans to invest $420-$485 million in 2023 to strengthen its coal operation. Looking ahead, Warrior Met Coal has announced its fourth-quarter 2023 earnings conference call scheduled for February 14, 2024, at 4:30 p.m. ET.

Colonial Coal International Corp. (TSX-V: CAD)

Colonial Coal International Corp. (TSX-V: CAD): Focused on Coking Coal Projects Colonial Coal International Corp. is a coal mining corporation based in British Columbia, focusing primarily on coking coal projects in the northeast Coal Block of British Columbia. This region has proven deposits and has attracted M&A activities from companies like Anglo-American.

In the recent annual general meeting (AGM) held on December 14, 2023, in Vancouver, British Columbia, several key decisions were made: Shareholders voted to re-elect David Austin, Ian Downie, Anthony Hammond, John Perry, Gregory Waller, and Partha S. Bhattacharyya as directors of the corporation for the ensuing year.

The re-appointment of PricewaterhouseCoopers LLP, Chartered Professional Accountants, as the corporation’s auditor was approved, and the directors were authorized to fix the auditor’s remuneration.

Shareholders approved the continuation of the corporation’s current share option plan, dated December 14, 2022.

As of the latest available information, the price of Colonial Coal International Corp. (CAD.V) in Canadian dollars is 2.1200.

In conclusion, the coal industry’s unexpected resurgence in 2024 offers investors promising opportunities. With companies like Benjamin Hill Mining Corp., Alpha Metallurgical Resources, Warrior Met Coal, and Colonial Coal International Corp. making strategic moves and achieving significant milestones, the coal sector remains dynamic and full of potential.