James River and the ‘Kind of’ Dead Coal Industry
James River Coal Co. (NASDAQ:JRCC) unleashed a torrent of bad news on Monday. The company told investors that its annual 10-K report will be delayed due to a combination of complications ranging from financial to operational. James River Coal also announced that it will not be making a scheduled interest payment on $13.3 million worth of convertible senior notes remaining from a 2011 issue.
“Additionally,” reads James River’s 8-K filing with the U.S. Securities and Exchange Commission, “given the Company’s current liquidity needs and the uncertainty surrounding the outcome of our strategic review process, our auditors have communicated to us that if they were to deliver an audit opinion based on the current circumstances, their audit opinion would contain a going concern qualification.”
The news sent shares tumbling as much as 14 percent. Year to date, James River Coal stock is down more than 57 percent and more than 72 percent year over year. The decline has been long and storied, though not entirely surprising. Increasingly strict environmental regulations and competition from the natural gas boom in the U.S. have been enormous headwinds for the coal industry. These headwinds have promoted a shift away from coal and toward cleaner-burning and often cheaper natural gas.
This shift has been evident in the decline of coal company stock prices across the board. Shares of Peabody Energy Corp. (NYSE:BTU) are off 25 percent year over year and 52 percent over the past two years. Alpha Natural Resources Inc. (NYSE:ANR) stock is off 45 percent year over year and 74 percent over the past two years, and the Market Vectors Coal ETF (NYSEARCA:KOL) is down 22 percent year over year and 47 percent over the past two years.