TORONTO (miningweekly.com) – US coal producer Foundation Coal earned $30,7-million in the second quarter, compared with a net loss of $4,4-million posted for the same period last year, the firm announced on Monday.

Margins were helped by higher realised coal prices, as well as lower costs, said Foundation, which agreed in May to be acquired by rival Alpha Natural Resources.

However, the company said that it had lowered its 2009 sales guidance for the second time this year, and now expects to sell between 68,5-million and 71,5-million tons.

Foundation said in May that it expected to ship between 70-million and 73-million tons of coal in 2009, down from an earlier estimate of 73-million to 76-million tons. Last year, Foundation sold 70,9-million tons.

US coal producers across the board have reduced production levels and sales forecasts for this year, after sales volumes fell sharply because of weak demand for both steel and electricity, and as customers defer contracted shipments.

The economic downturn continues to weigh on the coal markets in the US and around the world, the firm said on Monday.

"We continue to negotiate with several utility customers regarding the timing of deliveries,” said CEO James Roberts.

“However, we believe that we have sufficiently rationalised 2009 production to account for any potential customer deferrals, and we have fine tuned our 2009 shipment guidance accordingly.”

On June 1, Foundation reported that it had reached a settlement agreement to end a dispute with ArcelorMittal.

Foundation had previously launched legal action against the steelmaker, claiming breach of contract, but ArcelorMittal agreed to take delivery of “significant volumes” of metallurgical coal from Foundation's Kingston mine in 2009 and future periods, the firm said.

Foundation mines coal in Central and Northern Appalachia, as well as from surface mines in the Powder River Basin, in Wyoming.

In the context of the current market conditions, shipments from all producing regions were “robust” during the second quarter, the firm said.

Shipment from the Powder River Basin increased by 400 000 t to 12-million tons compared with the year-ago period and Northern Appalachian shipments in the second quarter of 2009 were nearly flat at 3,3-million tons compared with 3,4-million tons in the second quarter of 2008.

However, Northern Appalachian shipments in the second quarter of 2008 included 300 000 tons of purchased coal, so shipments of higher margin, company-produced Northern Appalachian coal rose by approximately 200 000 tons compared to the second quarter last year.

Shipments from Central Appalachia decreased to 1,1-million tons because of production cutbacks.

The company realised higher prices for its coal from all three regions, but coal sales revenue declined to $399-million in the second quarter, compared with $404,8-million in the same period of 2008.

The decrease was attributable to lower Central Appalachian shipments, partially offset by higher shipment volumes from the Powder River Basin and higher average realisations per ton, particularly in Northern and Central Appalachia, Foundation said.

Shareholders are scheduled to vote on Friday on Alpha Natural's proposed $1,5-billion acquisition of Foundation and, if the deal is approved, it should close the same day.

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