Massey's Quest Takes New Direction - Analyst Blog

Massey Energy Co. (MEE) gave a new direction to the ongoing investigation to go into the cause of the April explosion at its Upper Big Branch mine in West Virginia, which killed 29 miners.

Massey's management said that, as per new evidence gathered by company experts, the deadly explosion was caused by the sudden rush of natural gas probably from cracks in the mine's floor, rather than a build-up of methane gas from unsafe coal mining and ventilation procedures.

According to Massey, an analysis of gas emissions near the area where the explosion probably occurred shows that the chemical make-up was closer to natural gas from non-coal sources than the gas that comes from coal seams. The company is now seeking permission from the federal Mine Safety and Health Administration (MSHA) to bring in specialized equipment to study the area.

The federal Mine Safety and Health Administration declined to comment on Massey's new interpretation. The agency officials said that the investigation for the cause of the incident is still in process. MSHA officials continue to remain confident that they'll arrive at the cause of the explosion by the time the investigation is completed.

Earlier, Massey had said that a crack in the mine floor had let loose dangerous methane gas on the basis of the air samples taken in the hours after the blast. The federal Mine Safety and Health Administration had dismissed that theory.

The final verdict on the cause of the accident is expected to make the mining picture in Central Appalachia clear, though the timing of it is still uncertain.

The result of the impact of the mine blast and increased regulatory scrutiny on Massey's performance has been mounting losses since the April incident. The company posted a loss of 33 cents in the most recent quarter, with revenues of $810.2 million.

Though the clear loser from the incident is Massey, other Central Appalachia producers are also faced with the problem of increased scrutiny, which has hampered the productivity of mine operators. This has raised the cost of operating mines in the region, pushing down the overall profitability of companies. Other losers on this front include – Walter Energy Inc. (WLT), Alpha Natural Resources Inc. (ANR) and Patriot Coal Corporation (PCX).

 
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