Photo by: Duane Daws
TORONTO (miningweekly.com) – US coal producer Arch Coal on Tuesday reported a narrower-than-expected second-quarter loss, despite the loss for the period being 34% wider than in the same period last year.
The St Louis, Missouri-based miner that produces both electricity-generating thermal coal and steelmaking metallurgical coal from its diversified operations in every significant US coal basin, reported a net loss of $97-million, or $0.46 a share, compared with a net loss of $72-million, or $0.34 a share, a year earlier.
Revenues totalled $713.8-million for the three months ended June 30, a 7% dip from the $766.3-million a year earlier. Excluding special items, the company reported a net loss of $0.46 a share, which beat average analyst expectations of a loss of $0.49 a share. Arch missed 20 analysts’ average expectations of revenues of $714.62-million.
“During the second quarter of 2014, increased shipments, higher pricing and strong cost control drove margin expansion in each of our operating regions compared with the first quarter,” Arch president and CEO John Eaves said.
He pointed out that Arch’s successful cost control efforts – underscored by strong operating performances at the Leer mine, in Appalachia, and West Elk, in Colorado, had allowed it to reduce the cost-a-ton expectations for those segments.
Arch last week announced that it would idle its Cumberland River complex, located in Wise County, Virginia, in response to weak global metallurgical coal prices.
“Although idling higher-cost coking coal capacity lowers our metallurgical coal volume expectations for 2014, it also shifts our mine portfolio toward higher-margin metallurgical coal operations and enhances our competitive cost position in that region,” Eaves noted.
Arch said its second-quarter consolidated cash margin a ton expanded 71% when compared with the first quarter ended March 31, reflecting both higher prices and lower costs a ton in each operating segment. Higher-priced domestic thermal coal sales, slightly offset by lower pricing obtained on metallurgical coal shipments drove improved consolidated sales price a ton.
The company's operating costs fell to $20.55/t from $21.19/t.
In the Powder River basin, Arch reported a second-quarter cash margin a ton that was 33% higher compared with the first quarter. The average sales price a ton increased modestly over the same time period, while cash cost a ton declined 3%, benefitting from the effect of increased shipments and strong cost control.
In Appalachia, Arch earned a cash margin of $7/t in the quarter compared with $2.22/t in the first quarter. The average sales price a ton increased 2% over the same period, reflecting higher prices on thermal and industrial coal sales as well as a larger percentage of metallurgical coal in the company’s regional volume mix.
Cash cost a ton decreased 5% over the first quarter, driven by a shift in production toward the company’s lower-cost mines in the region and the Leer mine’s successful ongoing ramp-up to full production.
In the bituminous thermal coal segment, Arch’s cash margin nearly doubled over the first quarter to $11.51/t. The average sales price a ton increased 9% over the same period, reflecting increased domestic demand and lower export volumes.
Arch recorded a cash cost of $19.83/t in the second quarter, a 12% decline quarter-on quarter, driven by strong operating performances at its eight mines in the region.
Arch reduced its full-year output guidance as a result of ongoing transportation bottlenecks affecting thermal coal deliveries and the impact of metallurgical production curtailments.
Arch now expected thermal sales volumes to be between 124-million tons and 130-million tons. The company had last week lowered its metallurgical coal sales guidance, expecting to ship between 6.3-million tons and 6.9-million tons for 2014.
Despite gaining $0.19 a share on the NYSE on Tuesday morning to trade at $2.98 apiece, the company's stock had lost 38.49% in value since the start of the year.