The Virginia-based miner’s credit rating was downgraded by Moody’s Investors Service following two weeks of positive stock performance and a dramatic return to negative trading last Friday.

After an inspiring 74% increase in price since November 16, James River’s New York-listed stocks experienced their third consecutive negative session yesterday with a 5% drop to $3.22.

The miner’s recent positive momentum followed encouraging forecasts from Raymond James analyst James Rollyson, who suggested that rising gas prices would be a boon to the coal industry and James River in particular.

Rollyson correctly set a $3 price target for James River when the stock was trading at $2.74 and noted that slower growth in natural gas supply would benefit coal markets as winter demand from utilities increased.

Moody’s, however, cited weakening credit protection as a result of general difficulties in the Central Appalachian coal scene as justification for its negative ratings outlook.

“James River is dealing with a combination of cost escalation due to increasing regulatory scrutiny and weak pricing due in part to low natural gas prices,” the ratings company said in its report.

“While the company has taken positive actions to reposition its operations and shore up its balance sheet, as described on the third quarter earnings call, we expect external factors will preclude it from maintaining credit measures consistent with the B3 rating level.”

The clash of analyst opinions and the resulting turbulence on James River stock performance seem to represent a microcosm of wider uncertainty at a crossroads for the coal sector.

Though rising gas prices can only be good news for coal, the price rebound is launching from a low base and mild, unpredictable winters remain an increasingly unpredictable wildcard for short-term energy markets.

In this industry climate, a little speculation may be all it takes to send an unsuspecting coal stock flying – or crashing.