- The Washington Times - Monday, December 8, 2003

The onset of winterlike weather has been great news for Massey Energy Co.

The Richmond-based coal miner has seen the value of its shares soar in the past month, due in part to higher coal demand, which has led to higher prices.

Shares of Massey rose $1.09 yesterday to close at a 20-month high of $17.79 on the New York Stock Exchange.

Yesterday’s surge came after Legg Mason analyst Paul Forward predicted that the company’s stock price will reach $21 by the end of the year. He said earnings will rise to 53 cents per share next year, increasing his previous estimate of 48 cents per share in earnings for 2004.

Massey Energy reported a third-quarter net loss of $3.8 million, or 5 cents per share, compared with a loss of $1.3 million, or 2 cents per share for the comparable period in 2002. The company recently announced it would refinance some of its debt by selling $360 million in senior notes, at 6.625 percent.

Analysts said Massey will benefit from an increase in the price of coal in central Appalachia, the company’s home region. Coal there sells for about $39 per ton, up from $28 per ton a year ago.

Massey CEO Don Blankenship said last week that the company is already seeing prices as high as $48 per ton for metallurgical coal, which is used to make steel. The average price for metallurgical coal for most of 2003 was about $35 per ton.

Metallurgical coal accounts for about one-third of Massey’s sales. Steam coal makes up about 60 percent and the remaining 10 percent comes from other kinds of industrial coal.

Massey said it expects to sell about 10.7 million tons of metallurgical coal in 2003, surpassing analyst estimates by nearly 15 percent.

Analysts said there are several market conditions that will keep coal stocks attractive. For one thing, the U.S. dollar is weak compared with the currencies of other major coal exporters like Australia. This has been a major reason for the increase in prices on U.S. coal.

Also, concerns over a natural-gas shortage have turned some consumers toward coal. And the widespread blackout that crippled the Northeast over the summer and the massive power outages after Hurricane Isabel have raised concerns over the reliability of electric power, Mr. Forward said.

The Energy Information Administration said the amount of coal used to generate electricity rose more than 3.8 percent during the first half of the year.

Analysts also said that attitudes toward coal, considered a major pollutant by many environmentalists, have softened a bit due to industry efforts to develop “clean coal” technologies.

Events halfway around the world may also be helping Massey. Problems with Chinese railways have forced many coal producers there to cut down on exports, according to a report from Merrill Lynch analyst Daniel Rolling.

Massey still lags behind some of its competitors, including St. Louis-based Arch Coal Inc., which reported net income of $11.09 million (18 cents per share) in the third quarter this year.


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