Expansion at the wrong time
To its credit, James River Coal Company Coal (NASDAQ:JRCC) sees the writing on the wall. It attempted to make changes with the early 2011 acquisition of International Resource Partners. That purchase brought with it the “majority” of the company’s metallurgical coal business. That business operates out of the CAPP region and accounted for 36% of that division’s volume and 42% of its revenue in the second quarter.
The only problem is that met coal is also experiencing price and demand declines right now. In other words, James River Coal Company Coal (NASDAQ:JRCC) is in the midst of the perfect storm. There’s a reason why the stock is trading hands in the low single digits.
The only bright spot is the company’s Midwest division, which accounts for around 20% of its coal volume. That’s not enough over the long term and coupled with the many headwinds James River is dealing with, points to an industry player that you should probably avoid.
The article This Coal Miner Owns the Wrong Coal originally appeared on Fool.com and is written by Reuben Brewer.
Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends Alliance Resource Partners, L.P.. The Motley Fool owns shares of CSX.
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