Royal Energy Resources Inc. is currently evaluating "a number of possible acquisitions of operating coal mines and non-operating coal assets," the company reported in a securities filing.
Royal's current management acquired control of the company in March 2015 with the goal of using the company as a vehicle to acquire "undervalued natural resource assets." Despite recent distress in coal markets, Royal is banking on projections that coal will supply a significant percentage of the nation's energy needs for the foreseeable future and that metallurgical prices will remain in a price that is profitable for U.S. producers.
"Management believes there are a number of attractive acquisition candidates in the coal industry which can be operated profitably at current prices and under the current regulatory environment," the securities filing states.
Ramaco Resources Inc. executives said on an Aug. 14 call that they were also interested in acquiring metallurgical coal prices, but suggested they had visited multiple sites and had not found any that made a compelling financial case. Other companies that have recently indicated some interest in potentially acquiring metallurgical coal properties include Contura Energy Inc. and American Resources Corp.
Royal currently controls about 268.5 million tons of proven and probable coal reserves. The company recorded revenues of approximately $65.6 million and a net loss from operations of approximately $1.8 million in the second quarter from selling 1.1 million tons of coal in the period. The company's primary source of revenue came from about $39.7 million in steam coal sales and about $25.4 million in metallurgical coal sales in the quarter.
The company's filing noted that it raised $8.5 million through the sale of shares of common stock in private placements and $6.4 million through the issuance of notes payable. Royal reported liquidity of $1.9 million as of June 30.