While coal production for the quarter improved by almost 1 million tons to 8.6Mt and higher average sale prices increased revenues added 16% to $530 million since June 2011, the company’s record gains were offset by increased operating costs and development expenses.

Total operating expenses increased 21% to $424 million while development of the White Oak longwall in Illinois was estimated to have caused an additional $4.6 million of losses for the Oklahoma-based miner.

Outside coal purchases also increased $10 million on the quarter to $16 million, primarily as a result of increased brokerage coal sales volumes and higher cost per ton of coal purchased.

Depreciation, depletion and amortization increased $13 million to $52 million in the quarter due to the start-up costs associated with the Tunnel Ridge longwall on the Pennsylvania-West Virginia border.

“The first half of 2012 has been an extremely challenging market environment for the coal industry as the US experienced significant year-over-year declines in coal-fired electricity generation causing a steep reduction in domestic coal demand,” Alliance Resource Partners president and chief executive Joseph Craft said.

“Recently, hotter weather patterns, rising natural gas prices, strong export thermal sales and supply reductions by other coal producers gives us hope that better days are ahead for the coal markets.

“We still are concerned, however, about a weak US economy and the direction of the global economy.

“This weakness and uncertainty has impacted demand and pricing for our metallurgical coal sales for the remainder of this year.”

The company said it was expecting net income results for full-year 2012 to be between $345 million and $385 million.

In addition to ongoing work at White Oak, Alliance is also continuing to develop its Gibson South mine in southern Indiana which is expected to produce 3 million tons per annum of coal.