Arch Hunts to Boost Exports - Analyst Blog

Coal miner Arch Coal Inc. (ACI) has tied up with a Canadian Crown Corporation, Ridley Terminals Inc., to execute its strategy of improving coal exports to the Asia-Pacific region. Arch Coal's deal with the Canadian Corp. gives it access to a marine terminal located near Prince Rupert, British Columbia.

The five-year agreement with Ridley provides Arch a throughput capacity at the terminal of up to 2 million metric tons of coal for 2011 and up to 2.5 million metric tons of coal for 2012 through 2015. 

Located on Ridley Island, Ridley Terminals also offer speedy coal transportation to the Asian markets. Ridley has an annual capacity to hold up to 12 million metric tons of coal. The facility also nurtures expansion plans with the desire to increase its capacity to 24 million metric tons by 2015.  

This transaction marks Arch's second significant step to its goal of boosting Powder River Basin coal sales in Asia, specifically the Pacific Rim markets. This deal gives Arch immediate access to the growing seaborne market for thermal or steam coal used in power generation.

Moving ahead with the export strategy, Arch had recently acquired a 38% stake   in the Millennium Bulk Terminal on the west coast. Located on the Columbia River near Longview, Washington, the terminal takes charge of supplying coal from Arch's Powder River Basin and Western Bituminous Region into the Asia-Pacific regions, which is the world's largest and fastest-growing coal market. Arch continues to negotiate with various terminals to further grow its exports.

Based in St. Louis, Missouri, Arch Coal engages in the production and sale of steam and metallurgical coal. The company also ships coal to domestic and international steel manufacturers as well as international power producers. The company primarily competes with Peabody Energy Corp. (BTU) and Massey Energy Co. (MEE).

Arch Coal is expected to release its fourth-quarter and fiscal 2010 results on January 28, 2011. The Zacks Consensus Estimates for fourth-quarter 2010, fiscal year 2010 and fiscal year 2011 are 47 cents per share, $1.09 per share and $2.81 per share, respectively. The company had recently guided 2010 earnings in the range of $1.11–$1.15 per share.

Arch Coal currently retains a Zacks #3 Rank (short-term Hold rating). We maintain our long-term Neutral rating on the stock.

 
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