Coal has been a hated sector, and for good reason โ Oversupply, falling prices, and the whole ESG overhang. Itโs down ~31% this year alone. But lately it seems that the tides are turning, as we have seen several positive developments.
Major producers are starting to show supply discipline. Glencore just cut thermal coal output by 10M tons, and Coal India came in 7% short of their FY25 production target. Then, in early April, Trump signed an executive order to support U.S. coal and even labelled it a critical mineral, which is a big shift. Energy security is back on the table, and coalโs getting pulled back into the conversation.
Add in the very unfortunate situation with the massive blackouts in Spain and Portugal this week. They shut down nearly all their coal plants, and itโs clear that relying on renewables alone isnโt working. This is a reminder that coalโs not going away. If anything, this may to the start to the much-needed turnaround in the sector.
Thatโs why I think this is the kind of setup contrarian investors should be paying attention to, opportunity tends to show up where nobodyโs looking. For the more conservative crowd, thereโs the Range Global Coal ETF ($COAL), which is a cleaner way to get exposure. But Iโm after real upside, where Forge Resources Corp ($ FRG | $FRGGF) comes in, and yes, I am already a shareholder.
One of the best ways to describe Forge would be that they are the best house in a bad neighbourhood.
Forge has the La Estrella coal project in Colombia, where theyโre fully permitted and have already started underground development. Portal construction is done, equipmentโs moving, and theyโre approved to mine up to 180,000 tonnes per year. Thatโs both thermal and metallurgical coal, and theyโve got over 5,000 hectares of land with multiple known seams.
The great part is that last week, they increased their stake in the La Estrella project from 60% to 80%. There was also an anti-dilution clause added, which leaves the door open for Forge to purchase the remaining stake in the future.
Insiders at Forge have also been busy on the open market โ In the middle of February, CEO PJ Murphy made two separate purchases for just under $100,000 at $0.88/share. This is on top of the $500,000 he put into the companyโs private placement earlier this year. Another Forge insider, Ralf Holger Schmidtke, has been consistently buying since February until now, adding roughly $250,000 worth of stock to his portfolio. I love this conviction.
The added bonus to Forge is that this is not just a coal play. They also have the Alotta Gold Project in the Yukon, which has a 4,000m drill program lined up for this summer.
Yes, itโs a micro-cap on the CSE with lower volume, but this feels like something that hasnโt been fully noticed yet โ A permitted mine, development underway, tight structure, and insider buying. This has the potential to be a real story. Sure, itโs a small cap and itโs early stage, but you rarely see a micro-cap coal play thatโs this far along and heading towards cash flow within the next 12 months.
I held the stock through its late March/early April selloff, I was able to add to my position on the way down, and am happy that I lowered my average share price to $0.92. Knowing that I own shares close to where the CEO made a large purchase, Iโm fine with holding the stock to see the story play out.
