Investors must have their head in the clouds to shun this IPO.
Global mining giant Rio Tinto
Cloud Peak Energy
Looking to comparable sales
Like house hunters scrutinizing comparable sales, we have a telling transaction from the recent past to shed light upon the present valuation of these new Cloud Peak shares. Back in March, Rio Tinto managed to sell its Jacob's Ranch coal mine to Arch Coal
Looking to Rio Tinto's ore reserves as of December 31, 2008, we find that the three mines in the Cloud Peak portfolio boasted combined proven and probable reserves of 948 million tons. Essentially, Rio Tinto has just sold a 52% stake in producing PRB coal mines to you -- the public -- for about a third less than Arch Coal paid for similar assets earlier in the year. The results of the IPO value the assets at about $1.27 per ton. These mines produced a combined 94 million tons of coal in 2008, which represents only about 78% of total permitted capacity.
Although Peabody Energy
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Fool contributor Christopher Barker can be found blogging actively and acting Foolishly in the CAPS community under the user name TMFSinchiruna. He tweets. He owns shares of Arch Coal and Peabody Energy. Berkshire Hathaway is a Motley Fool Stock Advisor selection, a Motley Fool Inside Value recommendation and The Fool owns shares of it. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool and its disclosure policy are firmly coupled.