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XMFSinchiruna (26.56)

Patriot's Overdone Slaughter



June 24, 2010 – Comments (9) | RELATED TICKERS: PCXCQ.DL , KOL , BTU

The market served up one seriously compelling investment opportunity this week when it painfully overreacted to Patriot Coal's mine closure announcement.

Have a look.

The coal story is a multi-decade event that is only just beginning, and not even a leveling off in China's growth rate will derail this secular bull market for coal.

After Tuesday's 16% decline, Patriot shares became the greatest bargain in the space.

Thoughts? Questions?

Thanks for reading, and reccing the piece if you enjoy the content.


9 Comments – Post Your Own

#1) On June 24, 2010 at 9:49 AM, GNUBEE (< 20) wrote:

Emperically, what effect will the mine closure have on PCX?

Is their plan to increase production a sound one? Do they already own property with known deposits/quality and approvals and simply need to get the machines to work? I'd like to know how they are going to increase production first.

Validate that, yes PCX sounds like a gift of fear.

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#2) On June 24, 2010 at 10:27 AM, XMFSinchiruna (26.56) wrote:


If you have tracked my analysis of the demand side for met coal, then you will have already formed an opinion on whether increasing production is a sound decision. In short, of course it is. :)

Yes to your second question ... this is an easy ramp-up for them, with some of it representing capacity that was taken off-line in 2008. A monster portion of the growth can come from one mine alone (Panther).

My job is to bring solid investment ideas to the table. Validating them with further research and due diligence, dear Fool ... that's your job. :)

Fool on.

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#3) On June 24, 2010 at 10:55 AM, goldminingXpert (28.81) wrote:

Haven't tracked PCX in particular or coal in general, but a company trailing at a trailing and forward PE of 12 with falling profits, no cash, and at 1.3x book seems just about fairly valued. Not too pricey, and not too cheap.

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#4) On June 24, 2010 at 10:55 AM, goldminingXpert (28.81) wrote:

should read: trading at a trailing and...

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#5) On June 24, 2010 at 11:08 AM, GNUBEE (< 20) wrote:


DD is the individuals responsibility. Panther is metallurgical and thermal. I do not know what % is which though.

Mine was kind of rhetorical statement.- If I am comfortable with their ability to ramp up production, I agree this is a buy. And I'm with you regarding met coal and the premium it commands. Assuming a price of $60/ton, Harris produced $37 mil last year, but was on target to produce less this year. if they were planning on taking it off line anyway, while increasing production, that's good. Don't know if Black Oak offsets Harris but Harris was on the downslope.

Is Black Oak producing yet?

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#6) On June 24, 2010 at 11:20 AM, XMFSinchiruna (26.56) wrote:


Come on, man ... you've been looking at miners for how long now and you're still paying attention to P/E multiples? 

And here I was just thinking of congratulating you on your impressive accuracy score. :)


Here's an interesting blast from the past, from December 22, 2008:

#17) On December 22, 2008 at 1:11 PM, TMFSinchiruna (98.46) wrote:goldminingXpert I love it... you're on the record, man. :) Anyone sitting on Treasuries and waiting for the $500 mark before converting to gold, I hope you have a comfy seat cushion and a solid bill of health ... it could be a while! Perhaps you're interested in a friendly wager? I'll wager we hit $1,200 before we hit $500 (which, for the record, I maintain we will never hit until after this massive economic crisis has completely run its course).Of course, with the level of manipulation of al these markets from the gov't and their friends at the investment banks, anything is possible in the near-term! Since government intervention is the sole uknowable factor, though, I can't fathom where you're deriving such a target from.



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#7) On June 24, 2010 at 12:04 PM, goldminingXpert (28.81) wrote:

I look at PE, Book value, debt, trend in profits, etc. in businesses I don't understand. I don't know much about mining outside of the precious metals, so I'm just using my quick cursory glance of valuation, which says that for a normal company, it is roughly fairly priced. Could conditions be different here? Sure. But this isn't a screaming buy on valuation like JAG was when it had a trailing PE of 7 and a Forward PE of 5 at one point, for example.

That's funny timing on your last comment. I'm in the process of writing of a post dedicated to you already. 

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#8) On June 24, 2010 at 12:17 PM, XMFSinchiruna (26.56) wrote:


Alright fine ... I'll hold off on disagreeing vehemently with your recent call for a Gammon bankruptcy. :)

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#9) On June 24, 2010 at 12:30 PM, goldminingXpert (28.81) wrote:

I'm calling for a GRS bankruptcy due to the utter incompetence of its management, not because I expect gold to go that much lower. I don't think the people running GRS could turn a profit running an ice cream shop on a beach in the summer.

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