Alpha Natural Resources Continues to Plummet After JPMorgan Downgrade

Michael Teague  |

Shares for Virginia-based metallurgical coal producer Alpha Natural Resources (ANR) headed lower on three times the average volume from the beginning of Friday’s trading session, after JPMorgan Chase (JPM) announced that it had downgraded the miner’s stock from “neutral” to “sell”.

The downgrade is just the latest mile-marker in what has been a rough 2014 for the coal mining firm, and is the direct result of the Wednesday announcement that Alpha had reached a deal with the the Environmental Protection Agency according to which the company will have to invest some $200 million into updating its water treatment systems, as well as pay a fine of $27.5 million in civil penalties in order to amend what appear to be countless permit violations of the Clean Water Act by subsidiaries in Virginia, West Virginia, Kentucky, Pennsylvania, and Tennessee.

The consent decree, brought against Alpha by the Department of Justice, stated that between the years 2006 and 2013 (at period during which the company has doubled in size) Alpha had exceeded discharge limits throughout its numerous operations in the Eastern US.

Alpha’s Senior Vice President of Environmental Affairs, Gene Kitts, confidently downplayed the matter in a statement, for all intents and purposes insinuating that his company had already been working on this issue without being compelled to do so by either federal or state governments: “Our combined total water quality compliance rate for 2013 was 99.8 percent. That's a strong record of compliance, particularly considering it's based on more than 665,000 chances to miss a daily or monthly average limit. But our goal is to do even better, and the consent decree provides an opportunity to proactively focus on improving on the less than 1 percent of the time that permit limits were exceeded.”

Whatever the motivation for the company’s relative acquiescence to the penalty fees, Kitts’ claim that the penalties were not the result of any contamination of public drinking water indeed appear to be true, and the leaks for which the company is now paying so dearly are the result of naturally occurring elements that likely found their way into the discharge water as a result of rainfall.

Friday’s news is just one more notch in the post of what has been a rough year for the company, given its most recent earnings report for the final quarter of 2013 that saw substantial losses, and helped to drag shares down 10 percent to just under $5 a piece, almost half what they had been trading for as recently as mid-November.

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