Tuesday, April 29, 2014

Background on James River Coal $JRCC

  • James River sells ~29% metallurgical coal and ~71%  thermal coal.
  • In 2011, JRCC acquired of International Resource Partners for $516 million, which had reserves of 61 million tons of metallurgical coal and 75 million tons of thermal coal, greatly increasing exposure to metallurgical coal.
  • JRCC issued several debt instruments to fund acquisition. The Company issued $230 million of 3.125% convertible senior notes due 2018, $275 million in senior notes due 2019 and entered into an agreement to increase its revolver to $100 million (previously $65 million).
  • JRCC is one of the highest cost producers, with an average cash cost per ton of $78 in 2012, making it particularly sensitive to declining coal prices.
  • High cost at JRCC comes from the geology, which means that there is a limit to improvements that could be achieved through bankruptcy.

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