UPDATE 3-Patriot Coal bets big on met coal; shrs hit 30-mth high
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Stocks
Patriot Coal Corporation
PCX.N
$28.43
+2.26+8.64%
8:51pm GMT+0100
Peabody Energy Corporation
BTU.N
$64.89
+1.47+2.32%
8:59pm GMT+0100
CONSOL Energy Inc.
CNX.N
$51.31
+1.61+3.24%
9:01pm GMT+0100
Tue Feb 1, 2011 12:43pm EST
* Q4 EPS $0.08 vs $0.12 last yr
* Q4 rev up 5 pct to $528.2 mln
* Sees 2011 sales volumes at 30-32 mln tons
* Sees 2011 met coal sales up 16-22 pct
* Shares up 9 pct (Recasts; adds conference call details, updates shares movement)
By Vaishnavi Bala
BANGALORE, Feb 1 (Reuters) - Patriot Coal Corp (PCX.N) plans to ramp up metallurgical coal production to tap into the surging steel demand in China and India, and sees significant increase in second-half earnings, sending its shares to a 30-month high.
Share of the thermal coal-focused company were trading up 8 percent at $28.24 in afternoon session. They had touched a high of $28.51 earlier. The broader Dow Jones US Coal Index .DJUSCL was up 2.87 percent.
Patriot is looking to expand production of metallurgical coal used for steelmaking to over 8 million tons this year, and said most of its capital expenditure is aimed at metallurgical coal production.
"We are planning to open seven new met mines in the next two years," Chief Executive Richard Whiting said on a conference call with analysts, adding that majority of this expansion would amount to incremental met volume.
Annual production at each of these new mines is expected to be between 200,000 and 750,000 tons, he said.
The company said it has booked more than 2 million tons of new metallurgical coal sales for 2011 delivery at prices substantially higher than those realized last year.
"Met coal is always a higher margin coal. So, if you are producing more met coal or switching to met coal market... it's going to be positive. But offsetting that positive is how much does it cost you to do that," analyst Meredith Bandy of BMO Capital Markets said.
POWER PACKED
Since October, spot prices for benchmark Newcastle, Australia thermal coal -- used in power generation -- have risen more than 35 percent.
"Patriot was able to take advantage of the increasingly strong overseas thermal contracts, and sell roughly 1 million tons of thermal coal into Europe at 'more favorable margins than it sold domestically'," Jeremy Sussman of Brean Murray Carret & Co said in a note to clients.
