jrcc liquidity issue

**zhao_xing** Sun Jan 07, 2007 10:57 pm

jrcc liquidity issue
Hi, Blast,

JRCC dropped a lot last few days due to the recent SEC filing. I am a little bit concerned about JRCC's liquidity issue. According to recent 8k, JRCC only has 7.5 millions to borrow under its revolver facility. If JRCC still keeps cash flow negative for 1-2 quarters, it will have no enough money to pay senior note's next semi-annual interest expense (i.e., 7.5millions every half year) due on June 1, 2007.

Now, Bell county transaction has been delayed. If the transaction is cancelled eventually, JRCC may have liquidity crisis in the very near future.

Could you give some analysis about the chance JRCC may go to chapter 11 again? I am a little bit uneasy that JRCC may not survive enough long until next coal bull market.

Thanks!

**blast_investor** Mon Jan 08, 2007 1:48 am

Re: jrcc liquidity issue
Hi zhao_xing,

BlastInvest newsletter model portfolio sold JRCC many months ago.

JRCC is riskiest stock in coal sector. The risk is due to its high cost nature, and aggressiveness of management orientation.

I have made mistake on this stock before and was not conservative enough on the margin of safety issue here on JRCC.

Specifically, this stock is going to rely on the mother nature for shareholder interest.

By my opinion, JRCC company will come out fine in next few years without real threat of chapter 11. However, the JRCC company is fine, shareholders may not be fine due to its risk. Shareholder interest will be at mercy of "mother nature" , which is weather, and its management.

Currently JRCC management has very little ownership interest so that you can not rely on management to look after after shareholder interest.

What happens is that if mild weather continues for next year, we will likely see lots of fire sale of JRCC mines and properties at cheap price, which is not good for shareholdres. Those assets are needed for boost shareholder interest when eventually the weak coal price is over this period of weather set back. JRCC does not have lots of high priced asset (such as coal reserve) to get cash so that selling assets, shutting down mines are the only way for survival of this company in case of need of cash.

However, hypothetically, if all mines are shut or sold for the need of cash, then lots of values will be gone because it is very costly to shut down mines, and restart mines, it is cost forbidding.

In the long run, I am positive on coal business. In the short term, particularly on JRCC, I no longer like JRCC that much due to lack of margin of safety, high cost, and low management ownership issues.

On the positive side, if mother nature helps, if cold winter comes soon in Northeast USA, and hot weather comes in summer, coal price would rebound quickly so that JRCC can quickly get into breakeven or profitable mode. If that is the case, then JRCC does not need to sell any assets or shut down huge amount of mines. Shareholder value will be preserved.

It is not all doom and gloom on JRCC. But this is going to be on mother nature.

I would stay out of this stock due its company-specific risk and lack of margin of safety.

zhao_xing wrote: Hi, Blast,

JRCC dropped a lot last few days due to the recent SEC filing. I am a little bit concerned about JRCC's liquidity issue. According to recent 8k, JRCC only has 7.5 millions to borrow under its revolver facility. If JRCC still keeps cash flow negative for 1-2 quarters, it will have no enough money to pay senior note's next semi-annual interest expense (i.e., 7.5millions every half year) due on June 1, 2007.

Now, Bell county transaction has been delayed. If the transaction is cancelled eventually, JRCC may have liquidity crisis in the very near future.

Could you give some analysis about the chance JRCC may go to chapter 11 again? I am a little bit uneasy that JRCC may not survive enough long until next coal bull market.

Thanks!