Jefferies Encouraged By ACI

Jefferies said in a report this morning that it believes global coal fundamentals will continue to tighten, allowing companies with excess capacity and well capitalized reserves to benefit. “Arch Coal ACI appears leveraged to a domestic pricing recovery through its PRB profile with 2011 metallurgical coal pricing leverage,” Jefferies writes. “We are encouraged to see Arch maintain its seven million tons plus coking and PCI shipments expectation for 2011, despite the temporary outage at Mountain Laurel. “During the quarter, Arch committed an additional 500,000 tons of met coal shipment for 2011, bringing the total to three million tons at prices north of $100 per ton FOB mine. We are modeling met coal sales of seven million tons in 2011 at an average price of around $120-$125 per ton. “We believe there is a risk to the upside to our met coal price estimates for Arch Coal, given the tightness in seaborne met coal markets.” Arch Coal currently trades at $34.80