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Posted

After some prodding, Sam talked up ICO at the FFH dinner.  Francis Chou also gave it the nod.  (Mind you his funds didn't hold any at the end of 2008).

 

What do you think?

Posted

Yes, ICO has some interesting characteristics and some nice assets. However, given the opportunity sets now available, it does not look as interesting as compared to others. In addition, this is a somewhat a growth play from my viewpoint. Given that they have placed the Tygart No. 1 mining complex on hold for two years until 2011, will you now have continued losses for this year and next? If so, that factors into 4 straight years of losses which does not bode well for the equity and maybe the reason for the precipitous fall. Irrespective, a true candidate on the radar screen though.

 

Cheers

(formally 653211)

Posted

I am not convinced on Sam's thesis on coal providing huge growth going forward.  Sam's thesis is that coal fired power could be on the upswing.  I am not convinced. 

 

I do agree that electric cars have to be charged with something but that does not imply that coal will be the source going forward. 

 

During the dinner Wayne C. indicated during his talk that he is of the opinion that there is loads of crude and natural gas underlying NA and the bulk of the holdup is in the refining. 

 

I have no idea about ICO on a relative merit basis as compared to other coal firms. 

Posted

Sam called coal the 800lb gorrila in the room, my interpretation is that coal represents too much cheap energy not to be developed over time. 

 

 

He also said ICO has little downside from current prices and that each share of Ico was backed by several tons of coal reserves. 

 

 

Ico profits will come with a rebound in demand for metal making coal and that their legacy problems were over. 

 

 

 

 

 

Guest Broxburnboy
Posted

"that coal represents too much cheap energy"

 

Coal fired power plants have to conform to newer and more stringent emissions standards, which erodes the economics.

The real energy generating market is for "clean coal", and that is not necessarily cheap.

Posted

 

"Coal fired power plants have to conform to newer and more stringent emissions standards, which erodes the economics.

The real energy generating market is for "clean coal", and that is not necessarily cheap."

 

Thats not where Sam said they'll be making their money...none the less I doubt China and India and the rest of the developing world will be under the same kind of environmental pressure. 

 

Posted

I thought Sam said the thermal coal will cover the costs and the real money will be made with the met coal and will depend upon steel demand.

 

Packer

Yea thats what I meant, sorry for not being clear.

 

Posted

Not that we here trust the rating agencies much anymore, I just noticed that ICO was downgraded by Moody last month. I guess that assume that both steel and electricity production will be down for 12 months or more.

 

http://www.bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=BSC%3AUS&sid=a8ZsGDXpymB0

 

International Coal Group Inc., the owner of 13 coal mines mostly in Appalachia, was downgraded yesterday by Moody’s Investors Service in view of “operational challenges” and the uncertain prices the company will receive for half its product in 2010.

 

The new corporate rating is Caa2 while the senior notes are now Caa3. Both are one grade lower.

 

Scott Depot, West Virginia-based ICG generated $1.1 billion revenue in 2008 from producing 17.9 million tons. The company is a combination of three coal producers purchased from Chapter 11 reorganizations by Wilbur Ross.

 

Anyone looking at the bonds ??

 

 

Cheers

Posted

Does anyone remember what website Sam suggested we investigate if we wanted to understand the economics of coal, oil and gas?  Sam mentioned that the presentation explained this very well.

Posted

The name of the professor is David Rutledge out of Caltech.  He has some interesting insights like the predicted amount of fossil fuel reserves is always over estimated and the inputs to the IPCC model for global warming use these inflated estimates to predict temperature change.  He makes an adjustment for both the lower amount of reserves actually used and the increased use of alternative energy sources and comes up with a much smaller effect.  The coal use curves also provide some interesting analogs for other fossil fuels.

 

Packer

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