Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of coal miner Patriot Coal (NYS: PCX) have fallen 10% today after a competitor announced another plant closure.

So what: Alpha Natural Resources (NYS: ANR) said it would close four mines that had become uneconomical. Falling coal prices and coal usage have caused companies to start closing plants that aren't cost-competitive, just as Patriot Coal did earlier this year.


Now what: You might think that less supply in the industry would be good for everyone, but what this really does is show just how dire the conditions are in coal. The low cost of natural gas has caused power generators to switch to natural gas, and more stringent regulations have caused older plants to close.

Don't say we didn't warn you. I wrote that it was time to abandon coal stocks in April and again in May, and I certainly wouldn't be buying in today.

Interested in more info on Patriot Coal? Add it to your watchlist by clicking here.

At the time this article was published Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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chistletoe

NG cannot and will not continue to be available at these prices, now significantly less than the costs of recovery. While $260/mmbtu is pretty cheap, after Katrina it hit $16 and that could easily happen again.
Coal is still the cheapest form of energy out there, and these days many consumers care about costs.

The EPA under Obama has been very, very hard, one might be forgiven for saying "vicious" against coal producers. but that could easily change too, his management of the economy is not winning the hearts and minds of many voters these days.

Patriot has escaped one of its shackles,a 5-year contract for 3.1 million tons of Illinois coal for below-cost prices, the contract expired not long ago. Another legacy liability contract expires this year. These two contracts are what kept the company from reporting profits.

Patriot controls 1.6 to 1.9 Billion tons of reserves ... they carry them on their books (property, plants and equipment) for the prices they were originally acquired, for the most part many decades ago. If cash flow becomes too much of a concern, they could sell a small part of those, most of which do not even have current mining operations involved.

Sure, this stock could still go under ... the Wall Street vultures sure do look anxious to make that happen.
But, it could easily go back to 25 or even 50 .... maybe its not Facebook, but a 20-bagger won't hurt too many peoples' portfolios these days ....

June 09 2012 at 6:00 PM Report abuse rate up rate down Reply
David Smithson

i'm a buyer at these prices.... 2x and 3x in 12months is a no brain er.

June 08 2012 at 12:35 PM Report abuse rate up rate down Reply