The contraction coincides with a cancerous industry slowdown and the recent idling of Cline’s flagship New Elk coal mine in Colorado which is expected to curb further company spending by 93%.
Expansion of company assets over the last year led the miner’s cash and cash equivalents to $US29 million compared to only $5 million in Q2 2011 but working capital position fell to $20 million at the end of March versus $48 million in November.
Coal production for the March quarter also showed negative momentum as a slip to 49,000 tons contrasted with the 66,000t New Elk was able to produce in the previous quarter by the end of February.
Stoppage of New Elk is being considered a cost containment measure to secure long-term sales contracts.
Cline president and chief executive Ken Bates says the company plan is to control spending until a cyclical market rebound can re-float full capacity operations.
“We have a large and expanded coal resource base that we believe will increase in value as the market readjusts in coming months,” he said.
“Our objective is to build our production capability in tandem with an eventual upswing in commercial demand and proactively address the cyclical downturn in demand with substantial reductions in operating and capital spending.
“Securing sustainable sales contracts remains a major near-term priority for the company and we are actively engaged in achieving this goal.”
Introducing longwall operations at New Elk is being considered as Cline replans the newly expanded mine.
In July, Cline confirmed a 59% increase in the measured and indicated resources at the complex after extending the property 93% in a deal with the state of Colorado and the Department of Wildlife.
Coal production at the site, however, is being driven by demand and sales rather than internal capacity and realization of improvements to the facility will be dependent on coal market recovery.
Cline says should a sales opportunity arise, the mine will be immediately ready to swing into production with the only lag factor being the procurement of labor and the associated training.
“With the current issues in the steam coal market, the procurement of skilled additional labor is believed to be achievable,” the company said.