GREY:STTYF - Post by User
Post by
greenandgoldon Sep 28, 2011 12:29pm
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Post# 19093658
Royal Coal Shaky
Royal Coal ShakyCareful out there. There a ticking bomb in the SND portfolio. I've been looking at all the portfolio companies--all of them are fine except for Royal Coal, which looks like it's in big trouble. If I had to make a bet, I'd bet it's not going to survive.
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Sure, Royal Coal recently raised its average sales price to $76.44 per ton, but their cost of production was $94.16 per ton last quarter (it was much worse the previous quarter). It's unclear that they'll be able to close that gap. They are attempting to trim costs by buying equipment and the load-out facility (instead of leasing) but some costs are unavoidable. Tires, diesel fuel, and labor are all more expensive than in 2010. A increase in the market price of coal would help a lot.
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Royal Coal has maybe $500,000 in cash, tons of debt, and their market cap has been hammered to just $7 million. Will they need to do a financing at these levels? Unclear.