BHP Billiton Limited (ADR) (BHP), Peabody Energy Corporation (BTU), Alpha Natural Resources, Inc. (ANR): Three Miners Readying For Steel’s Rebound

Assuming steel demand hits the slow but steady stride that BHP projects, Peabody Energy Corporation (NYSE:BTU) will be ready to go for the ride. Still, 2013 is going to be a bad year for Peabody Energy Corporation (NYSE:BTU) on the earnings front. It is projecting anywhere from a loss of $0.16 a share to a profit of $0.09 in the third quarter. The fourth quarter should be just as uncertain. Longer-term investors looking for a relatively safe play on a coal market rebound, however, should take a look.

Down, but not out—yet
For really aggressive investors, struggling Alpha Natural Resources, Inc. (NYSE:ANR) might be the best option. The company has lost money in eight of the last ten quarters and its shares are down some 90% over the past five years. This is a situation that isn’t likely to change until coal prices start to pick up.

That said, Alpha Natural Resources, Inc. (NYSE:ANR) was the third largest global provider of met coal in 2012. And it has more terminal capacity than any other other U.S. coal miner, putting it in good position to continue supplying the world’s coal needs. Almost half of Alpha Natural Resources, Inc. (NYSE:ANR)’ sales come from its met operations.

The company’s debt level, at about 45% of the capital structure, is reasonable, but the first half was particularly weak, with negative free cash flow. That’s the first time since the company went public that it’s burned cash. That’s a bad sign and makes the stock much riskier than BHP or Peabody Energy Corporation (NYSE:BTU), but also provides notable upside if it muddles through to brighter days.

Not all bad
Iron ore and met coal are near necessities as emerging economies industrialize. You can’t build infrastructure without them. Although the heady growth days are behind this dynamic duo, slow and steady demand growth is what lies ahead. Once the current market stabilizes, BHP and Peabody will both benefit from better pricing and higher demand. Alpha Natural Resources, Inc. (NYSE:ANR) will, too, but getting to that point is likely to be trying for investors as it will be filled with red ink. The upside potential, though, is likely to be higher.

The article Three Miners Readying For Steel’s Rebound originally appeared on Fool.com and is written by Reuben Brewer.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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