Costs It's interesting to look at Walter Energy and their costs. Last quarter their US mines produced 2.0 million tons of HCC at a cost of $110/ton. The quarter before they produced only 1.5 million ton from their US operations and their costs were $118/ton. The reason costs were lower per ton this quarter was primarily due to higher production where fixed costs could be spread over more tons. WLT also produces top quality hard coking coal and they consistently achieve benchmark pricing.
Now you tell me how is Cline going to achieve costs of under a $100 per ton as per the technical report? The only way that I see costs that low is if they produce a bunch of thermal coal which is cheaper to produce but also doesn't fetch HCC pricing. One final point. Walter is developing Willow Creek in BC which is an asset that they acquired when WLT purchased Western Coal. That project is in the start up phase and they produced 120,000 tons of PCI last quarter. Their costs...$448/ton. Not a typo. The quarter before Willow Creek produced 155,000 tons and their cost was still an astronomical $216/ton. WLT has the luxury that they produce cash flow their other mines so they can afford to subsidize Willow Creek until their production levels reach profitable levels. How is Cline going to subsidize their assets until they produce meaningful cash flow? Do they even have enough cash on their balance sheet to fund operations? Nobody really knows because the last financial report was for the November 30,2011 quarter.