The firm is expecting American Resource to produce 1.5 million tons of coal in fiscal 2021 from its Perry County and McCoy Elkhorn assets and generate $104.4 million in revenue in the process. HC expects the company’s Wyoming County Coal to begin production in fiscal 2022 and total coal production to hit 4.2 million tons in fiscal 2023.
A large portion of the company is owned by management, which HC Wainwright believes is a positive.
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“AREC's management and insider share-based ownership represents a significant stake in the company,” the firm wrote. “Notably, AREC insiders held roughly 14.8M common shares as of the end of FY19, or roughly 46.9% of the pro forma share count after a recent $13.0M equity raise. We view this large insider position as a positive anomaly within the mining space, and a testament towards generating future value.”
HC Wainwright calculated the $4 price target based on a discounted cash flow analysis. The firm applied a 15% DCF discount due to what it called “the risk of operating in the somewhat unpredictable coal industry.”
American Resources is a supplier of high-quality raw materials to the rapidly growing global infrastructure market. The company is focused on the extraction and processing of metallurgical carbon, an essential ingredient used in steelmaking.
It has a growing portfolio of operations located in the Central Appalachian basin of eastern Kentucky and southern West Virginia where premium quality metallurgical carbon deposits are concentrated.
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