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Analyst raises expectations for 'one of the most resilient' US coal miners

FBR & Co. is maintaining its outperform rating on Contura Energy Inc. and raised its price target from $100 to $102 based on strong results reported in the prior week.

The company was trading on the OTC market at $72.50 per share as of 10:16 a.m. on April 5. In an April 5 note, analyst Lucas Pipes wrote that Contura realized "particularly strong margins" in its metallurgical coal business and trading business.

"The trading business especially, with an EBITDA contribution of $33 million, outperformed our expectations," Pipes noted, adding that the company showed off an ability to capitalize on strong metallurgical coal prices.

The note said Contura's balance sheet is supported by low operating costs that can withstand volatility through coal markets. Pipes wrote that Contura is "one of the most resilient coal producers in the U.S. today."

"We are positive on '[Contura] due to the company's portfolio of high-quality met coal and low-cost thermal coal production, as well as strong trading and logistics business," the note said. "We believe that [Contura] can also realize substantial upside in the event that the stock's liquidity improves following an expected listing on a major exchange and potentially more active analyst coverage. We believe [Contura] currently trades at a substantial discount to its peer group."

Pipes noted that the company did not issue any updated 2017 guidance with its results as it had with prior guidance in November.

Contura, a spinoff from Alpha Natural Resources Inc.'s bankruptcy, recently announced a new, $400 million term loan facility. The company is also taking over Peabody Energy Corp.'s interest in Dominion Terminal Associates, a coal export terminal in Newport News, Va. Arch Coal Inc. is taking a smaller interest in the same facility.