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Mine closures take toll on Arch result

ARCH Coal has reported a net loss for the second quarter of 2012 of $US436 million, or a $22 million loss when exit costs arising from five mine closures in Appalachia and associated costs are excluded.

Lou Caruana
Mine closures take toll on Arch result

It compares with a net profit of $76 million for the previous corresponding quarter and comes off revenues of $1.1 billion which are 8% higher.

Arch recorded mine closure and asset impairment costs of $526 million and an impairment charge of $116 million to reduce the company's goodwill balance due to weak coal market conditions and the company's decreased equity market valuation.

"Arch is successfully managing through unprecedented soft coal market conditions domestically and abroad," Arch president and chief executive officer John W Eaves said.

"We are executing on our strategy to navigate near-term challenges and emerge as a stronger, more competitive company when markets rebound.

"Despite lower shipment levels in the second quarter of 2012, we aggressively managed our costs, which helped to increase our overall operating margin to $1.87 per ton versus $1.66 per ton in the first quarter.”

The Q2 2012 consolidated per ton operating margin expanded 13% versus Q1.

Sales volumes declined 4 million tons to 31.5Mt in Q2 versus Q1 because of lower shipments in the company's Powder River Basin segment.

The consolidated sales price increased $2.71/t versus Q1 due to a larger percentage of higher-priced tons in Arch's overall volume mix.

Compared with Q1, consolidated cash costs increased $2.24/t in Q2, benefiting from lower per ton costs in several regions, offset by the effect of reduced shipment levels and a larger percentage of higher-cost tons in the company's overall volume mix.

Given continued uncertainties in the global macroeconomic environment, Arch is reducing its 2012 metallurgical coal sales expectations to approximately 7.5Mt.

"Looking ahead, we continue to pursue efforts to reduce operating costs and capital spending across the organization," Eaves said.

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