Coal is making a comeback, after being left-for-dead by excessive government regulations and historically cheap natural gas prices. Under the Obama Administration, the coal industry was constantly under fire by new regulations and government interference. The Former President was notoriously anti-coal because of its perceived impact on the environment. However, newly elected President Trump is changing the status quo on coal, as he promised supporters on the campaign trail.
During the first six months of the new administration, Obama-era regulations on coal have already begun to be rolled back. For the first time in almost a decade, U.S. coal companies are becoming optimistic about the future.
In addition to government interference, the coal industry was being battered by historically low natural gas prices. Most people may consider the “energy war” to be among fossil fuels and renewable energy, but in reality It’s natural gas vs. coal. Major pricing shifts in either commodity can have an inverse effect on the other.
Between 2014 and 2016, due to high inventory, natural gas prices plunged to multi-year lows. As natural prices begin to recover back to a more normal range, utility and energy producers will favor coal, as prices become more appealing. Over the past year, natural gas prices have rallied 14.66%, narrowing the spread with coal.
According to the U.S. Energy Information Administration (EIA), coal continues to be the second largest energy source worldwide. From 2012 to 2040, world coal consumption is estimated to grow an average of 0.6% per year. In 2012, 153 quadrillion Btu in coal was consumed globally, and by 2040, according to the EIA, it will reach 180 quadrillion Btu. The United States, India, and China are estimated to continue accounting for over 70% of total coal consumption throughout the time period.
As the coal industry’s future brightens, one company that is well positioned to benefit is New Colombia Resources, Inc. (OTC Pink: NEWC).
Overview: New Colombia Resources, Inc. (OTC Pink: NEWC)
New Colombia Resources, Inc. (OTC Pink: NEWC) is engaged in the acquisition and development of high-quality metallurgical coal in the Republic of Colombia. The company maintains 100% ownership in its La Tabaquera mine, which has estimated reserves of 15-17 million tonnes of metallurgical coal. New Colombia Resources, Inc. (OTC Pink: NEWC) also hopes to provide rock aggregates for the development of Colombia highway and railroad projects.
Aside from energy and rock aggregates, New Colombia Resources, Inc. (OTC Pink: NEWC) is a major shareholder in Sannabis SAS, a Colombian medical marijuana company. The company holds just under 50% of the legal medical cannabis producer.
What is Metallurgical Coal and How Does Colombia Fit In The Picture?
In the world of coal, there are two main types: metallurgical and thermal. Thermal coal is primarily used for energy and heating. Metallurgical, or coking, coal has a high carbon content and caking ability, which is used for steelmaking.
New Colombia Resources, Inc. (OTC Pink: NEWC) operates in Colombia to exploit the fact that Colombia is one of the largest exporters of coal to the United States. Despite the fact that the United States is one of the world’s largest producers of coal, it imports additional coal from countries like Colombia because the coal is cheaper, higher quality, and has low-sulfur content. In fact, transporting coal from the Appalachia region to Florida adds $26 to every ton of coal. Importing coal from Colombia adds only $15 per ton.
According to Nick Cunningham of OilPrice.com, “the coal seams of Appalachia have been mined for over a century, and consequently, the richest coal deposits have been mined out.” Comparatively, Colombian coal mines are far less developed than U.S. coal mines, and yet, have an abundance of rich coal deposits left for mining.
“Another advantage of Colombian coal is because of its low sulfur content, it burns relatively cleaner. For utilities seeking to comply with increasingly stringent requirements concerning air pollution, low-sulfur Colombian coal can provide added flexibility,” continues Cunningham. In an era where coal use is continuously being blamed for causing climate change, the cleaner-burning Colombian coal is a welcoming compromise.
Ultimately, through joint ventures with US coal companies, New Colombia Resources, Inc. (OTC Pink: NEWC) plans to combine high-quality Colombian metallurgical coal with U.S. coal and ship the US / Colombian blend to Asia, where coal demand is extremely high.
NEWC: Plans to Expand Sannabis Treatments
Aside from coal, New Colombia Resources, Inc. (OTC Pink: NEWC) wants to implement a similar Colombia-based strategy with medical cannabis, through its stake in Sannabis SAS. Some areas across the United States are known for having great conditions to produce cannabis. However, cannabis production is seasonal in the U.S., which limits grow capabilities.
Colombia’s climate allows cannabis producers to grow year-round, with substantially less cost which comes in near $30.00 per pound. Once Sannabis has produced the medical cannabis, the oils are extracted to produce various products and treatments. It is important to note that the oil extraction process in Colombia uses the cannabis flower, rather than just leaves. This allows for higher quality oil with greater potency.
In May 2017, New Colombia Resources, Inc. (OTC Pink: NEWC) and Sannabis announced that they have successfully treated another cancer patient, using the company’s cannabis extract products. The cancer patient was a male in his 60s and was suffering from prostate cancer originally diagnosed in January of 2003, with a Prostate Specific Antigen (PSA) level of 5.25. That August, the patient had his prostate removed with a PSA level of 10.05. Unfortunately, by February 2016, the cancer came back and his PSA had surged to 14.31, while tests were showing signs of metastasis on his femur.
By December 2016, the patient’s PSA had reached 18.63. In January 2017, after a CT scan showed lumps on his lungs, the cancer patient began treatment of Sannabis Pure Cannabis Indica Extract. By the end of January his PSA had dropped to 3.83. By February 2017, his PSA dropped further to 0.87 and scans showed the lumps had disappeared. As of May 2017, the cancer patient has a confirmed PSA reading of 0, thanks to the use of Sannabis’ cannabis extract treatments.
As the joint venture relishes in the major developments, plans have been laid out to expand treatment. In May 2017, New Colombia Resources, Inc. (OTC Pink: NEWC) and Sannabis announced they are opening their first Sannabis Spa treatment center for cancer patients. The spas are being developed and marketed to foreign patients that are not currently able to legally import the novel Colombian medical marijuana strains to their country.
NEWC: Financial and Industry Analysis
As of June 2017, New Colombia Resources, Inc. (OTC Pink: NEWC) maintains a market cap value of about $ 4.21 million. Furthermore, the company has a share structure consisting of 1 billion authorized shares, 659 million shares outstanding, and a float consisting of 558 million shares, as of June 13, 2017.
Overall, New Colombia Resource, Inc. (OTC Pink: NEWC) estimates it will generate some revenue from its coal operations, during full year 2017. However, there are no exact estimates for the amount of revenue Sannabis will generate to its top line, as New Colombia Resources, Inc. (OTC Pink: NEWC) owns less than 50% of the medical marijuana company.
Here are five other companies that have similar operations to New Colombia Resources, Inc. (OTC Pink: NEWC) and could be used to help find a fair value for the company:
Medical Marijuana, Inc. (OTC Pink: MJNA) operates as a cannabis and industrial hemp holding company, which primarily focuses on developing CBD and cannabis oils. As of June 2017, Medical Marijuana, Inc. has a market cap value of $265.95 million. The company maintains a share structure consisting of 5 billion authorized shares and 2.56 billion shares outstanding, as of February 2017. During the first quarter 2017, Medical Marijuana, Inc. reported total revenue of $3.61 million, but a net loss of ($2.22 million).
Terra Tech Corp. (OTCQX: TRTC) is diversified medical marijuana company, which operates the following subsidiaries: Blum, IVXX, Inc., Edible Gardens, MediFarm, LLC, and GrowOp Technology. The cannabis company maintains a market cap value of $97.52 million, as of June 2017. Furthermore, Terra Tech Corp. has a share structure consisting of 990 million authorized shares, 591.04 million shares outstanding, and a float consisting of 357.15 million shares, as of May 2017. During the first quarter 2017, Terra Tech Corp. reported total revenue of $6.82 million, but a net loss of ($10.11 million).
Alliance Resource Partners, L.P. (NASDAQ: ARLP) operates as a coal mining limited partnership. The company primarily operates eight underground coal mines across the Illinois Basin and Appalachia. The coal miner is the largest producer within the Illinois Basin and is the second largest coal producer in the eastern United States. As of June 2017, Alliance Resource Partners, L.P. has a market cap of $1.69 billion, 74.6 million shares outstanding and a float consisting of 37.06 million. During the first quarter, Alliance Resource Partners, L.P. reported total revenue of $461.08 million and net income of $104.9 million.
Warrior Met Coal, LLC (NYSE: HCC) focuses on the exploration, mining, and exporting of metallurgical coal for steel production. The company has an estimated annual production capacity of 7.3 metric tons of metallurgical coal, across two underground mines in Alabama. The metallurgical coal miner has a market cap valuation of $917.38 million, 53.46 million shares outstanding, and a float consisting of 31.49 million shares, as of June 2017. During the first quarter, Warrior Met Coal, LLC reported total revenue of $254 million and net income of $108.3 million.
Rio Tinto PLC (NYSE: RIO) is engaged as a global mining and metal company, which focuses on the exploration, development, processing, and exporting of mineral resources. Among its mining focuses, Rio Tinto produces thermal and metallurgical coal. The mining giant has a market cap of $73.3 billion, 1.8 billion shares outstanding, and a float consisting of 1.19 billion, as of June 2017. During full year 2016, Rio Tinto reported total revenue of $33.78 billion and net income of $4.78 billion.
As New Colombia Resources, Inc. (OTC Pink: NEWC) ramps up its metallurgical coal production and exporting, the company looks to benefit from the positive shift in the U.S. government’s attitude towards the coal industry and rising natural gas prices. The company’s stake and joint venture with Sannabis is a worthy diversification, as the medical cannabis markets are forecast to see explosive growth over the next several years. Effective use and treatment of cancers will allow New Colombia Resources, Inc. (OTC Pink: NEWC) and Sannabis to have a proof-of-concept when establishing their Sannabis Spa locations. Overall, New Colombia Resources, Inc. (OTC Pink: NEWC) is poised to benefit from the revival of the global coal industry and the explosive medical marijuana market.