MTEI - Mountain Energy - No BASHING Allowed Message Board

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Microcap & Penny Stocks : MTEI - Mountain Energy - No BASHING Allowed

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Nov 3 10:00 AM EST

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To: Thomas C. White who wrote (4384)	7/1/1998 9:40:00 PM
From: eric deaver	Read Replies (2) of 11684

<<Where I would take issue is on calculation of COGS. $16 - $17 is probably a good figure for a "cost delta" -- that is, the additional direct variable cost incurred for extraction and transportation of an additional ton of coal. But I am willing to bet that it does not include equipment depreciation, which in the case of Arch and Zeigler calculations is included (basically, the components included in their calculations are direct mining costs including routine reclamation; depreciation; amortization of leases and other direct land costs; direct transportation; but not SG&A). In the extraction business, this has to be included in COGS, because it's a very capital intensive business. >> Tom, thanks for continuing this discussion. I personally find it very useful. I was rereading what you were saying above. If what I'm reading is true, the calculation by Arch and Zeigler include transportation. Also you say the $16 - 17 would be a good cost delta figure including transportation. When we are looking at margins, we have been comparing our costs to mine prices. Take a look at this link: eia.doe.gov At the last several lines in the table. Look like WV coal END USER prices are more like $30 - $33 / ton. Wouldn't this be the more appropriate number to use and doesn't it then make the $10 / ton margin doable? Finally honest question (not that my others were not honest :)) I was confused by this statement: <<Basically, you probably need more or less around $.75 to $1 of net (depreciated) equipment for every $1 of coal sold per year (so, for example, if you are shipping $100 million of coal a year, you probably will end up having to have around net $75 - 100 million of plant and equipment). >> Are you saying I have to take a one dollar per year depreciation charge on my equipment for each dollar of coal I sold per year? Maybe I am reading this wrong. Thanks, Eric

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